This is a common occurrence in SA, firstly do not panic.
This is only the first step in litigation it is a formality that gets the ball rolling. Do not however take this letter lightly, you should attend to this letter with the utmost importance.
When a letter of demand comes into your possession you have roughly 14 calendar days to respond.
Keep in mind the letter must be addressed to you or your company, it must set out a demand this does not need to be detailed. The letter must have the amount owed/requested present. The contract details of the other party as well as the banking details of the requesting party so that if you wish to you can comply with the demand. It must also inform you when legal action will be taken against you should you not comply this will be written as a date, they can mention you have a period of 10 days, 14 or 20 days to comply.
1. Read the letter carefully.
2. Think about what the other party is demanding, is the request reasonable?
3. Do you have a defence to the demand, this means have you committed a breach or do you owe the specified amount.
4. Contact your attorney, allow them to read the letter and listen to your version.
5. Prepare your case, gather evidence to prove your innocence.
6. You may choose to pay the demand.
7. You could contact the other party and try to negotiate settlement if you know that you have no legal defence to their claim.
8. You could do nothing and ignore the letter of demand.
If you choose to do nothing the other party will then proceed with the next step in the civil process. This will be to serve summons onto you.
Remember there are no legal cost implications that can be held against you at the letter of demand stage. Be warned that as soon as summons is served you could be ordered to pay the legal costs of the other party.
If the demand amount is reasonably low between R5000 and R10 000 you could be facing a summons to the small claims court. If the demand is higher you could potentially be faced with litigation in the magistrates court or High Court. This becomes extremely costly you could easily rack up a legal bill almost double the cost of the demand.
Alternatively you could use the letter of demand to address the issue there and then. You could negotiate a possible payment method or consent to a rectifying agreement between you and the other party before the matter becomes complex and costly.
If you feel that you are not at fault and the allegations made are unfounded then you should not contact the other party. You should file your notice of intention to defend the matter if you are served summons and seek a cost order against the plaintiff/other party when they refer the matter to court.
As you can see a letter of demand is not to be taken lightly but at the same time you should not always look onto it with absolute fear.