A Letter of Demand (LOD) is a formal written demand requiring a person or company to remedy a legal or contractual breach, make payment of money owed, or comply with a particular obligation within a specified period.
In Malaysia, a Letter of Demand is commonly used before commencing legal proceedings. It gives the recipient an opportunity to resolve the dispute before the matter proceeds to court.
A properly drafted Letter of Demand can therefore be an important step in protecting your legal position before commencing a civil claim.
The Letter of Demand will usually state what has happened, why the sender considers the recipient liable, what is being demanded, and the deadline for compliance.
Importantly, a Letter of Demand is not the same as a court judgment. It does not by itself give the sender the power to enforce payment against the recipient.
If the recipient does not comply, the claimant may need to consider commencing appropriate legal proceedings.
Is a Letter of Demand Mandatory in Malaysia?
There is no general rule that every civil claim in Malaysia must be preceded by a Letter of Demand.
Whether a demand is required or advisable depends on the nature of the claim, the relevant contract, legislation, and the circumstances of the dispute.
In some situations, a contract may specifically require a party to give notice or demand before taking further action. The wording of the agreement should therefore be reviewed carefully.
Even where a Letter of Demand is not strictly mandatory, it may still be useful because it clearly communicates the claimant’s position and gives the other party an opportunity to resolve the matter before litigation.
Why Send a Letter of Demand?
There are several practical reasons for issuing a Letter of Demand.
1. To formally notify the other party
2. To give the recipient an opportunity to resolve the dispute
3. To clearly state the claim
4. To establish a clear deadline
5. To indicate that legal proceedings may follow
What Should a Letter of Demand Contain?
There is no single mandatory format applicable to every Letter of Demand.
However, a properly prepared demand will commonly contain the following.
1. Details of the parties
The letter should identify the claimant and recipient accurately.
For companies, the company’s correct registered name should be used.
For individuals, the person’s name and appropriate address should be stated where available.
2. Background of the dispute
The letter should briefly explain the relevant facts.
For example:
- When the agreement was entered into;
- What the parties agreed;
- What payment was due;
- When payment became due;
- What breach occurred; and
- What previous attempts were made to resolve the matter.
The objective is not necessarily to write the entire case in the demand letter. It should be sufficiently clear for the recipient to understand the basis of the demand.
3. Legal or contractual basis
Where appropriate, the demand should identify the relevant agreement, contractual provision or legal basis for the claim.
For example, a demand involving a tenancy may refer to the relevant clause of the tenancy agreement concerning rental payment.
A property-related demand may refer to the relevant provision of the Sale and Purchase Agreement.
4. The amount claimed
If money is being claimed, the amount should be clearly stated.
Where appropriate, the calculation should be explained.
For example:
Outstanding rental: RM30,000.00
Interest: RM1,500.00
Total demanded: RM31,500.00
The claimant should be careful not to demand sums that cannot properly be recovered.
5. The action required
The recipient should be told exactly what is required.
For example:
- Pay RM50,000;
- Deliver vacant possession;
- Return certain documents;
- Rectify specified defects; or
- Cease a particular breach.
6. Deadline for compliance
The letter should state when compliance is required.
The deadline should be reasonable in the circumstances and consistent with any contractual or statutory requirements.
7. Consequences of non-compliance
The letter may state that further legal action will be considered or commenced if the recipient fails to comply.
The precise wording should depend on the circumstances of the case.
Can I Send a Letter of Demand Without a Lawyer?
Yes. A person can communicate a demand directly to another party.
However, there can be advantages to having a solicitor review or issue the demand, particularly where the dispute involves a substantial amount of money, complicated contractual provisions, property, or a potential court claim.
A solicitor can assess:
- The legal basis of the claim;
- Whether the amount claimed is recoverable;
- The applicable contractual provisions;
- Possible limitation issues;
- The appropriate remedy;
- The evidence available; and
- The appropriate next step if the recipient does not comply.
For advocates and solicitors in Malaysia, the Malaysian Bar’s rules also regulate the manner in which demand notices are issued. For example, an advocate and solicitor is not permitted to issue a demand notice other than through the law firm.
The Malaysian Bar also states that correspondence issued on a law firm’s letterhead generally has to be signed by an advocate and solicitor holding a current practising certificate, subject to the stated exceptions.
Can a Lawyer Demand Legal Fees in a Letter of Demand?
This is an area where care is required.
The Malaysian Bar’s ruling on Letter of Demand and Costs states that an advocate and solicitor should not, in a Letter of Demand issued on behalf of a client, demand the solicitor’s own costs or fees for issuing the letter unless there is an agreement in writing between the client and the addressee.
The circumstances and any contractual provision between the parties should be considered.
What Happens If the Recipient Ignores the Letter of Demand?
If the recipient does not respond or refuses to comply, the claimant may consider the next appropriate legal step.
Depending on the dispute, this could include:
- Negotiating a settlement;
- Issuing a further letter;
- Commencing court proceedings;
- Commencing arbitration where an arbitration agreement applies; or
- Taking another remedy available under the relevant contract or law.
The appropriate course depends on the nature of the claim.
For example, a straightforward debt claim may be approached differently from a dispute involving a property, injunction, contractual termination, or disputed ownership.
A Letter of Demand Is Not Magic — It Does Not Guarantee Payment
One common misconception is that once a Letter of Demand is issued by a lawyer, the recipient will automatically pay.
A Letter of Demand is not a magic letter that guarantees payment, and it is not a court judgment. The recipient may choose to pay, negotiate, dispute the claim, ignore the demand, or take legal advice.
The fact that a Letter of Demand is issued by a law firm also does not, by itself, establish that the amount demanded is legally owed.
A Letter of Demand is essentially a formal step to communicate:
“This is our client’s claim. This is the amount or remedy being demanded. This is the basis of the claim. Please comply within the stated period, failing which our client may consider taking further legal action.”
What If the Recipient Still Refuses to Pay?
If the recipient refuses to pay despite receiving the Letter of Demand, the claimant may need to consider the next appropriate step.
Depending on the circumstances, this may include:
- Negotiating a settlement;
- Sending a further response or demand;
- Commencing court proceedings;
- Commencing arbitration where applicable; or
- Pursuing another remedy available under the contract or law.
This is why the Letter of Demand itself should not be viewed as the end of the legal process.
In some cases, the demand letter successfully resolves the dispute without litigation. In other cases, it is simply the first step before commencing legal proceedings.
The Strength of the Claim Matters
Whether a Letter of Demand achieves its purpose often depends on the underlying claim.
A strongly drafted letter cannot turn a weak claim into a legally enforceable one.
Before sending a demand, it is therefore important to consider:
- Is there a valid contract?
- Has the other party actually breached the contract?
- Is the amount claimed accurate?
- Can the amount be legally recovered?
- Is there documentary evidence supporting the claim?
- Are there contractual notice requirements?
- Are there limitation issues?
- What remedy is actually available if the recipient refuses to comply?
A demand that is accurate, properly supported and legally sustainable can put the claimant in a stronger position when negotiating or considering further proceedings.
Does Sending a Letter of Demand Mean You Will Win the Case?
No.
A Letter of Demand represents the claimant’s position. It is not a court finding that the claimant is legally entitled to the amount demanded.
Letter of Demand for Unpaid Rental
One common use of a Letter of Demand in Malaysia is to recover unpaid rental.
A landlord may issue a demand where a tenant has failed to pay rent under a tenancy agreement.
The demand should ideally identify:
- The property;
- The tenancy agreement;
- The agreed monthly rental;
- The months for which rental remains unpaid;
- The total outstanding amount;
- Any contractual interest or other recoverable charges; and
- The deadline for payment.
The landlord should also consider whether the tenancy agreement contains specific provisions relating to default, termination, notice, interest, utilities, deposits or other consequences of non-payment.
Letter of Demand for Breach of Sale and Purchase Agreement
Letters of Demand are also commonly used in property transactions.
For example, a purchaser or vendor may allege that the other party has failed to comply with an obligation under a Sale and Purchase Agreement.
Depending on the circumstances, the demand may seek:
- Payment of an outstanding balance;
- Compliance with a contractual obligation;
- Completion of the transaction;
- Delivery of documents;
- Vacant possession;
- Compensation for a recoverable loss; or
- Other contractual remedies.
The exact remedy will depend on the terms of the Sale and Purchase Agreement and the applicable law.
Letter of Demand for Unpaid Invoices or Outstanding Sum
Businesses may also issue Letters of Demand to customers who have failed to pay outstanding invoices or payments.
When There Is a Property Dispute
A Letter of Demand can also arise in property-related disputes, including disputes involving:
- Sale and Purchase Agreements;
- Unpaid purchase price;
- Vacant possession;
- Property damage;
- Tenancy disputes;
- Co-proprietor disputes;
- Breach of contractual obligations; or
- Other property-related claims.
How Long Should the Recipient Be Given to Pay?
There is no universal period that applies to every Letter of Demand.
The appropriate deadline depends on matters such as:
- The amount involved;
- The nature of the claim;
- The urgency;
- The terms of the contract;
- Any statutory notice requirement; and
- The complexity of the dispute.
A solicitor should avoid treating a particular number of days as automatically appropriate for every case.
What If the Recipient Disagrees With the Demand?
The recipient should not simply ignore a Letter of Demand if there is a genuine dispute.
Depending on the circumstances, the recipient may:
- Respond substantively;
- Deny liability;
- Explain why the amount is disputed;
- Provide supporting documents;
- Make a settlement proposal;
- Offer payment by instalments; or
- Obtain independent legal advice.
A response should address the actual issues raised rather than simply stating that the claim is rejected.
Is a Letter of Demand the Same as a Writ of Summons?
No.
A Letter of Demand is a pre-action communication.
A writ is a formal court document used to commence certain civil proceedings.
What Makes a Good Letter of Demand?
A good demand letter should generally be:
Clear
The recipient should understand exactly what is being alleged and what is demanded.
Accurate
The facts, dates, amounts and contractual references should be checked carefully.
Legally supportable
The demand should be based on an identifiable legal or contractual right.
Specific
Avoid vague demands where the recipient cannot determine what action is required.
Proportionate
The tone and demands should be appropriate to the nature of the dispute.
Consistent with the evidence
The allegations in the letter should be supported by documents and other available evidence.
Common Mistakes in a Letter of Demand
Some common problems include:
Mistake 1: Inflating the amount claimed
A claimant should not simply add every conceivable expense to a demand without establishing that those amounts are legally recoverable.
Mistake 2: Making unsupported threats
A demand should not contain exaggerated or unsupported statements merely to pressure the recipient.
Mistake 3: Getting the facts wrong
Incorrect dates, amounts or contractual references can undermine the credibility of the demand.
Mistake 4: Giving an unreasonable deadline
The appropriate period should be considered in light of the circumstances and any contractual or statutory requirements.
Mistake 5: Sending the wrong demand
The demand should correspond to the actual remedy available.
For example, demanding a specific remedy does not make that remedy legally available simply because it appears in the letter.
Mistake 6: Waiting too long
A Letter of Demand should not be used as a reason to delay taking necessary legal action where limitation or other procedural deadlines may apply.
Can a Letter of Demand Resolve a Dispute Without Court Proceedings?
Yes.
A demand letter can be the beginning of a negotiation.
The recipient may agree to:
- Pay the amount in full;
- Pay by instalments;
- Rectify the breach;
- Return property;
- Enter into a settlement agreement; or
- Negotiate another resolution.
If an agreement is reached, the parties may consider documenting the settlement formally so that the terms are clear.
Frequently Asked Questions About Letter of Demand in Malaysia
Is a Letter of Demand legally binding?
A Letter of Demand itself is generally not a court order. It is a formal demand communicating the claimant’s position and the action sought from the recipient.
Can I ignore a Letter of Demand?
You can choose not to respond, but ignoring it may carry practical risks, particularly if the sender subsequently commences legal proceedings. The appropriate response depends on whether the claim is valid and disputed.
How much does a Letter of Demand cost in Malaysia?
There is no single fixed fee applicable to every Letter of Demand. Legal fees depend on factors such as the complexity of the dispute, amount involved, documents required and work involved.
Can I send a Letter of Demand by email?
The appropriate method of delivery depends on the circumstances and the available contact details. Where proof of delivery may become important, consideration should be given to a method that provides evidence that the demand was sent and received.
Can a Letter of Demand be sent through WhatsApp?
A WhatsApp message may communicate a demand, but whether it is appropriate as the principal method of formal demand depends on the circumstances. For significant disputes, a properly documented formal letter may be preferable.
What happens if the debtor pays after receiving the Letter of Demand?
If the amount demanded has been paid in full and all other issues are resolved, the claimant should consider whether any further action is required and whether written confirmation of settlement or withdrawal of the demand is appropriate.
Can a Letter of Demand be used for a property dispute?
Yes. Property disputes involving unpaid rental, contractual breaches, failure to complete transactions, vacant possession and other obligations may involve a Letter of Demand, depending on the circumstances.
Conclusion
A Letter of Demand in Malaysia is an important pre-action tool for communicating a legal claim and giving the recipient an opportunity to resolve a dispute before court proceedings become necessary.
However, a demand letter should not simply be treated as a threatening letter. It should be based on the actual facts, the relevant contract or legal rights, and the remedy that can properly be claimed.
Whether you are seeking unpaid rental, outstanding debts, payment under a contract, compensation, performance of a contractual obligation or a remedy relating to a property dispute, the wording and strategy of the demand can be important.
If you are considering sending or responding to a Letter of Demand in Malaysia, obtaining legal advice before taking the next step can help you understand your rights, obligations and available remedies.