In the Philippine legal system, a Demand Letter is a formal document sent by a creditor to a debtor, officially requesting the payment of an outstanding debt. It is often the final step before initiating a formal lawsuit in court. Under the Civil Code of the Philippines, specifically Article 1169, "those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation."
Sending a demand letter is not just a courtesy; it is often a legal necessity to establish that the debtor is in "legal delay" (mora), which may then entitle the creditor to claim interests and damages.
Key Legal Components of a Demand Letter
To be effective and legally sound, a demand letter should contain the following elements:
- Clear Identification of Parties: Full names and addresses of both the creditor and the debtor.
- Basis of the Debt: A brief statement explaining why the money is owed (e.g., a promissory note, a bounced check, an unpaid invoice for services rendered, or a personal loan).
- The Exact Amount Owed: Specify the principal amount. If there are stipulated interests or late fees based on a written contract, itemize them clearly.
- Demand for Payment: An unequivocal statement demanding the full payment of the total amount within a specific timeframe (usually 5 to 15 days from receipt).
- Consequences of Non-Compliance: A statement indicating that if payment is not received within the period, you will be forced to pursue legal remedies, such as filing a civil case for "Sum of Money" or a criminal case for "Batas Pambansa Blg. 22" (Bouncing Checks Law) if applicable.
- Mode of Payment: Instructions on how the debtor should pay (e.g., bank transfer, cash, or manager's check).
Step-by-Step Process to Writing the Letter
1. Gather Your Evidence
Before writing, ensure you have documentation to back your claim. This includes:
- Signed contracts or Promissory Notes.
- Invoices or delivery receipts.
- Screenshots of messages or emails acknowledging the debt.
- Copies of dishonored checks (if any).
2. Drafting the Content
Maintain a professional and firm tone. Avoid using threatening language that could be construed as harassment or coercion, as this could backfire in court.
Note: While you can write a demand letter yourself, having it drafted or signed by a lawyer (notarized) often carries more weight and shows the debtor that you are serious about legal action.
3. Serving the Letter
In the Philippines, the proof of receipt is as important as the letter itself. There are three common ways to send it:
- Personal Service: Handing it to the debtor directly. Ensure they sign a "received" copy with the date.
- Registered Mail (PHLPost): This is the gold standard for legal proof. Keep the registry receipt and the return card.
- Courier (LBC, Grab, etc.): While faster, ensure you get a tracking receipt that confirms delivery to the specific individual.
Legal Effects of Sending the Letter
- Establishment of Delay: As per Article 1169 of the Civil Code, the debtor is not legally in delay until a demand is made.
- Triggering Interest: Once the debtor is in delay, legal interest (currently 6% per annum as per BSP Circular No. 799, unless a different rate was agreed upon in writing) begins to accrue.
- Condition Precedent: For many court cases, such as "Small Claims" or "Collection of Sum of Money," the court will ask if a demand was made. Failure to prove a demand was made can sometimes lead to the dismissal of the case for being premature.
Sample Outline of a Demand Letter
| Section | Description |
|---|---|
| Heading | Date and addresses of both parties. |
| Salutation | "Dear Mr./Ms. [Surname]," |
| The "Demand" | "DEMAND IS HEREBY MADE for the payment of [Amount]..." |
| The History | "This amount stems from the loan agreement dated [Date]..." |
| The Deadline | "You are given ten (10) days from receipt of this letter to settle..." |
| The Warning | "Failure to comply will leave us no choice but to seek judicial relief..." |
| Closing | "Sincerely," followed by your signature. |
What Happens Next?
If the debtor pays, ensure you issue an Acknowledgement Receipt or a Release and Waiver to finalize the transaction. If the debtor ignores the letter, your next step is usually filing a case in the Metropolitan or Municipal Trial Court, specifically under the Revised Rules on Small Claims if the amount does not exceed P1,000,000.00.
Would you like me to draft a specific template for a demand letter based on your particular situation?