When an overseas counterparty does not pay, a Japanese company cannot leave the situation as it is and must issue a demand for payment. A Demand Letter is a formal demand document, which may be prepared by a lawyer on behalf of the company, or by the company itself and submitted in its own name.
When to Prepare a Demand Letter
A Demand Letter may be prepared in the following cases. In some cases, the company’s accountant routinely submits a Demand Letter when the company is unable to confirm receipt of payment from an overseas business partner. In either case, the possibility exists that a dispute may develop in the future, so careful handling is necessary.
- If the other party does not have the money to pay the contract price:
- If the other party forgets to pay the contract price:
- When there is a dispute over the amount of the contract price:
- When there is a dispute over the obligation to pay the contract price; or
- When the other party is considering exercising its right of setoff.
Prior confirmation of the case
When preparing a Demand Letter, it is necessary to confirm the contents of the case in advance by reviewing the relevant documents. By reviewing e-mail correspondence, contracts, and other documents, we are able to determine in advance whether or not the demand letter is legally sound. The law firm reserves the right to refuse any case that the firm believe does not have a legal basis.
Letter head of law firm
When a Demand Letter is prepared in the name of a law firm, the document will be printed on bond paper using the law firm’s English letterhead. Each law firm has its own design for its English letterhead, and sending out a letter with a letterhead makes the document more formal and more valuable as evidence in a future trial.
Attorney’s Fees for Preparing a Demand Letter
We often ask our clients to pay a time charge for disputes with foreign companies, because the nature of such disputes is different from that of ordinary legal work. For clients with whom we have concluded an advisory contract, a certain discount rate is applied. In addition, simple demand letters and cautionary letters may be handled within the scope of the advisory fee. If you request a spot case, we will ask you to pay by time charge or pay a fee determined for each case (e.g., 100,000 yen for the starting fee and 10% for the contingency fee, etc.). In this case, you will be asked to sign a power of attorney agreement with us.
Sample of Demand Letter
Demand for payment of goods
December 21, 2019
Mr. Richard Davis
Fallen Construction Ltd.
100 Tall St.
New York, NY 12000
Re. Final Demand Letter
On behalf of our client Thompson Tacker Corp. (“Client”), we at Kuribayashi Sogo Law Office are writing to inform your company of an overdue payment owned to the Client. According to the sale and purchase agreement agreed upon August 20, 2018 between your company and the Client, your company owe $30,000 for the kitchen products sold from the Client to your company. The payment is currently 30 days overdue.
Unless you contact us immediately to discuss how your outstanding balance will be paid, we will be forced to pursue legal action to recover the debt which may leave your company liable to pay attorney’s fee, filing costs, and your credit history may be affected.
We hope that your company will address this issue immediately and that further action will not be required. However, if there is no response from your company, the Client has to take immediate legal action against your Company. If the above payment has already been made, please contact us so we can resolve the discrepancy.
Claim for payment of damages due to delay in delivery
A Demand Letter is the common name for a letter of demand, but sometimes the title of simply Notice or Warning Letter is used. Examples of Notices include the following. The following is a demand for payment of damages due to delay of goods.
I, as a legal counsel of Tacker Machine Manufacturing Company Inc. (hereinafter referred to as “Notifier”), hereby notify as follows. Notifier purchased items listed in exhibit A from your company based on the sales and purchase agreement dated on January 10, 2020. According to exhibit A, the shipment date was decided to be February 20, 2020. However, your company delayed the shipment date considerably, and large amount of damage was caused. Therefore, Notifier claims USD10,000 as compensation for damage caused by your delay of shipment. Notifier demand you to pay such amount within 10 days after the date you receive this notice. If you do not pay such amount by the date, Notifier will face no choice but to take certain legal actions unfortunately. Please contact me directly about all matters regarding this case.
May 10, 2020
Drafting a Demand Letter by a Law Firm
When a law firm prepares a demand letter, it is treated as a document of considerable formality and will be treated as important evidence in a future court case. In addition, the other party who receives a demand letter from a law firm is likely to consider being involved in a lawsuit, so the psychological pressure on the other party is likely to be extremely strong. We analyze your company’s legal position based on relevant contracts and e-mail correspondence, clarify what claims are legally allowed, and send a Demand Letter or Warning Notice to the other party on your company’s behalf. This will give you a much higher probability of recovering your debt. In addition, as shown in the above example, you will be able to receive reasonable compensation for damages caused by the other party’s delay in delivery.