Attorney’s Fees for Demand Letters in the Philippines
A comprehensive guide for clients and practitioners
1. Why demand letters matter—and why lawyers charge for them
A demand letter is a formal written notice sent before litigation, giving the other party a chance to comply, settle, or at least open negotiations. Although short, it compresses strategic, factual, and legal analysis into a single document; what looks like a “simple letter” can decide whether a case is filed at all or how it is later defended. Hence, Philippine lawyers routinely charge a professional fee for crafting and dispatching it.
2. The legal architecture behind attorney’s fees
| Source | Key Take-away for demand-letter fees |
|---|---|
| Civil Code, Art. 2208 | Courts may award attorney’s fees as damages “when the defendant’s act or omission has compelled the plaintiff to litigate or to incur expenses to protect his interest.” This covers the cost of a demand letter if you end up suing and win. |
| Civil Code, Art. 111 & Rule 138, Sec. 37 (Rules of Court) | Establish the attorney’s retaining and charging liens; the lawyer may retain documents or share in proceeds until fees are paid. |
| Code of Professional Responsibility and Accountability (CPRA, 2023) Canon III – Fees |
Lawyers must charge only reasonable fees (Rule 20.01) and should enter written engagement agreements for transparency (Rule 20.04). |
| IBP (Integrated Bar of the Philippines) Suggested Schedule of Attorney’s Fees | Non-binding but influential; many local IBP chapters publish tables citing typical minimum amounts for “letters of demand or notice to sue.” |
3. How Philippine lawyers actually bill a demand letter
| Arrangement | Description | Common price range* |
|---|---|---|
| Flat / Fixed fee | One-time payment for drafting, review of records, and dispatch (usually by courier and/or e-mail with proof of service). | ₱5,000 – ₱20,000 for straightforward money claims; ₱25,000+ for complex corporate or IP matters. |
| Hourly rate | Less common for small claims; the lawyer tracks time spent preparing, revising, and coordinating service. | Metro Manila mid-tier: ₱3,000 – ₱8,000 per hour; partners at top firms: ₱10,000+ per hour. |
| Retainer coverage | If the client is already a monthly retainer, drafting a demand letter often falls within the allotted “hours” or “matters” at no extra charge. | Monthly retainers range widely (₱20k–₱300k), but the marginal cost of a letter may be zero. |
| Contingency add-on | Rare at pre-suit stage; sometimes a lawyer advances the letter cost in exchange for a later cut of recovery (5 %–30 %). | N/A (paid from proceeds). |
*Indicative 2025 figures drawn from IBP chapter guides, firm brochures, and anecdotal surveys. Actual fees depend on location, counsel seniority, urgency, and case complexity.
4. Determining “reasonableness” under the CPRA
The Supreme Court assesses reasonableness by looking at:
- Time and labor required—including factual research and legal analysis.
- Novelty and difficulty of issues (e.g., maritime liens vs. simple money debt).
- Skill required and the lawyer’s standing in the profession.
- Amount involved and results obtained or sought.
- Customary charges in the locality.
- Contingencies (risk of non-payment, need for expedited work).
- Client-lawyer relationship (retainer arrangements, corporate vs. individual).
These parallel the factors in U.S. jurisprudence (the Lodestar method) but are codified locally through Canon III and case law such as ABS-CBN v. Gozon (G.R. No. 195956, April 20 2022).
5. Tax treatment and official receipts
| Item | Tax impact |
|---|---|
| 12 % Value-Added Tax (VAT) | Lawyers are VAT-registered once annual gross receipts exceed ₱3 million. Their official receipt for a demand letter must show basic fee plus VAT. |
| 5 % Creditable Withholding Tax (CWT) | Corporate clients typically withhold 5 % on professional fees and remit to BIR; the lawyer gets creditable tax certificates (BIR Form 2307). |
| Documentary Stamp Tax (DST) | Not applicable to the letter itself. |
| Notarial fee | A demand letter need not be notarized. If notarized (for extra formality), the ₱5 – ₱200 notarial fee is subject to 12 % VAT when charged by the lawyer-notary. |
6. Recovering demand-letter fees in court
- With contract stipulation: Many loan agreements fix attorney’s fees at 10 % of amount due. Courts usually honor the stipulation but may reduce it if unconscionable.
- Without stipulation: Plaintiff still may recover “litigation expenses” (Art. 2208) if they prove bad-faith refusal to pay after demand. Fees must be pleaded and proven (e.g., present the engagement letter and official receipt).
- Small Claims: Under A.M. 08-8-7-SC (revised rules), lawyer appearance is barred, but pre-suit demand-letter fees may be claimed as part of recoverable costs if documented.
7. Ethical and practical tips for counsel
- Use a Letter of Engagement (LoE) spelling out scope (“review documents, draft and send one written demand”) and fee basis.
- Collect an advance professional fee or, at minimum, reimbursement for courier or registry-mail charges.
- Provide proof of dispatch (registry receipt, e-mail read-receipt, courier airway bill); courts may later ask for this.
- Keep copies in both physical and digital formats for five (5) years—a CPRA retention requirement.
- Avoid threats of criminal prosecution unless the facts plainly support a criminal action; CPRA prohibits harassment and frivolous threats.
- Respect data-privacy obligations when attaching personal data (e.g., payroll records) to the demand letter.
8. Practical guidance for clients
- Ask for a written quotation up front. If you already have a retainer, confirm whether the demand letter is covered.
- Clarify timeline expectations—standard turn-around is three to seven working days; “rush” drafts cost more.
- Expect to sign and return an LoE; this paper trail protects both sides.
- Keep receipts; you may need them to claim the fee as damages or to deduct it as an ordinary business expense.
- Weigh cost vs. benefit: Even a ₱10,000 letter can be worth it if it spares you a ₱400,000 lawsuit. Conversely, for very small sums you might use barangay conciliation or a personal notice first.
9. Key take-aways
- No fixed national tariff—fees are governed by contract, guided by IBP schedules and CPRA reasonableness factors.
- Typical flat fee spans ₱5k–₱20k for routine money claims; complexity, urgency, and lawyer stature push it higher.
- Fees are recoverable in later litigation if bad-faith refusal after demand is shown or if a contract stipulates them.
- VAT and CWT apply, so clients should look for official receipts.
- An engagement letter and clear billing are your best defenses against fee disputes or ethical complaints.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Facts and fee ranges are generalized; always consult Philippine counsel for advice specific to your circumstances.