Receiving a demand letter in the Philippines can be a daunting experience. Whether it’s about an unpaid debt, a breach of contract, or a claim for damages, this document is often the final warning before a full-blown lawsuit is filed in court.
In the Philippine legal system, how you respond (or fail to respond) can significantly impact your position in future litigation. Here is a comprehensive guide on how to navigate this situation.
1. Understand What a Demand Letter Is
A demand letter is a formal document sent by a person or entity (the Demandant) to another (the Respondent), asserting a legal right and requesting a specific action—usually payment of money or performance of an obligation—within a set period.
In the Philippines, a "Final Demand" is often a prerequisite for filing certain cases, such as Unlawful Detainer (Ejectment) or Small Claims, to show the court that the plaintiff exerted effort to settle the matter extrajudicially.
2. Preliminary Steps: Don't Panic
Before drafting a reply, take these immediate actions:
- Verify the Source: Is it from a law firm, a collection agency, or the individual themselves? Check if it is signed and bears the official letterhead of a legitimate firm.
- Note the Deadline: Most letters give a period of 3 to 15 days from receipt to comply. Mark this on your calendar; ignoring it is rarely a good strategy.
- Preserve Evidence: Do not discard the envelope. The postmark or the date of receipt written on the receiving copy is crucial for calculating the prescriptive period or the deadline for your response.
3. Evaluate the Merit of the Claim
Analyze the contents of the letter objectively. Ask yourself:
- Is the claim valid? Do you actually owe the money or the obligation?
- Is the amount correct? Often, demand letters include "interest" and "attorney’s fees" that may be usurious or not stipulated in your original contract.
- Has it prescribed? Under the Civil Code, certain actions must be filed within a specific timeframe (e.g., 10 years for written contracts, 6 years for oral contracts).
4. Crafting the Response
Your response should be professional, concise, and written in a way that does not inadvertently admit liability. You generally have three options:
A. Admit and Settle
If you owe the debt but cannot pay in full, write a Proposal for Settlement.
- Acknowledge the obligation but request a payment plan.
- Ask for a waiver of interests or penalties.
- Pro-tip: Never pay without a signed "Release, Waiver, and Quitclaim."
B. Deny and Refute
If the claim is baseless, you must issue a Formal Denial.
- State clearly that you deny the allegations.
- Briefly mention your defense (e.g., "The obligation has already been paid," or "No such contract exists").
- Attach copies of receipts or proof of performance if available.
C. The "Middle Ground" (Request for Clarification)
If the letter is vague, you can respond by asking for a breakdown of the claims or copies of the supporting documents. This buys you time and forces the other party to show their hand.
5. Key Legal Considerations in the Philippines
| Aspect | Description |
|---|---|
| Small Claims | If the demand is for money only and is below ₱1,000,000, it likely falls under Small Claims. You don't need a lawyer in court for this, but you should consult one for the response. |
| Bouncing Checks | If the demand is related to a check you issued, pay within 5 days of receiving the notice of dishonor to potentially avoid criminal liability under B.P. 22. |
| Harassment | Collection agencies in the Philippines are prohibited from using threats, profanity, or contacting you at unreasonable hours under SEC and BSP regulations. |
6. Common Mistakes to Avoid
- Ignoring the letter: This is the most common mistake. Silence can be interpreted as a lack of interest in settling, prompting the claimant to file a case immediately.
- Admitting liability via text/email: Any informal communication you send after receiving the letter can be used as evidence in court.
- Being Aggressive: Using "fighting words" or threats in your reply will only harden the other party's resolve to sue.
7. When to Consult a Lawyer
While you can draft a reply yourself, it is highly recommended to have a lawyer review it if:
- The amount involved is substantial.
- The letter threatens criminal action (like Estafa or B.P. 22).
- You are being asked to vacate a property.
- You believe the claim is fraudulent.
Note: A response signed by a lawyer (a "Lawyer’s Reply") often carries more weight and signals to the sender that you are prepared to defend your rights in court.
Would you like me to draft a template for a formal reply to a demand letter based on your specific situation?