There are a few legal documents that take the form of letters. A Letter of Intent, a Demand Letter, and a Cease and Desist Letter work similarly in that they serve as notices or declarations that are often used to keep transactions or proceedings due to disputes out of court.
With that in mind, here is a brief look at each of the documents and the circumstances in which they can be used.
What Is a Letter of Intent?
A Letter of Intent (LOI) is a statement or declaration made in writing that expresses the intentions and understandings between two parties. The LOI is usually not a legally-binding document because, in most cases, the drafter will make it clear that they are not making a binding offer. Generally, the letter only serves as a promise to continue negotiations in good faith.
Good faith is a term that refers to two parties’ commitment to act honestly and fairly in an agreement without taking advantage of the other. It means that each party is offering a sincere commitment to keep their promises.
The letter is often considered a foundation for a definitive agreement, but on its own does not usually enforce legal obligations on either agreeing party.
There are many uses for a Letter of Intent, some of the most common ones being:
- During negotiations for the purchase of a business or real estate
- To receive scholarships (athletic scholarships in particular)
- In post-secondary applications
- To receive financing (e.g. loans or grants)
What Is a Demand Letter?
A Demand Letter, also known as a Letter of Demand or LOD, is a formal notice requesting payment or some kind of action (e.g. finishing up a job you hired someone to complete) from another party (usually a person or a business). Generally, demand letters are used to resolve conflicts outside of court so that a solution can be found quickly and without spending money on legal fees.
There are several types of demand letters:
“Debt Owed”: This is a letter used by an individual or creditor trying to collect a payment that is past due. It describes the amount of the debt and a description of the transaction that caused the debt, e.g. money owed for providing freelance writing services. Usually, immediate payment is demanded, but other settlements can be proposed to avoid litigation, like some form of collateral so that the creditor can still get some kind of repayment.
“Action Required”: This letter is used to request that a specific action be performed by the recipient of the letter. It’s usually used to demand that the person or party deliver on a promise they agreed to in an existing contract or agreement that they’ve since neglected. For example, if you paid someone to paint all of the rooms in your house and they didn’t finish the job.
It’s best to back up the demand claim with other documentation, so in the case of painting, you could include a copy of the Service Agreement and highlight the job description.
“Insurance Claim”: Most commonly used by accident victims, this letter serves to reach a settlement with an insurance company. The letter will contain a description of injuries, expenses, and any other information pertinent to the claim. The victim will also include a settlement amount with a deadline that the insurance company can accept in exchange for the victim’s right to sue. If the insurance company doesn’t accept, the claimant can take legal action.
“NSF Check”: This letter is used to request payment after a debtor’s check bounces due to insufficient funds or an account closure. The letter will have the check details (number, date, and payment amount) and the bank’s explanation for the check bouncing. Usually the letter will request payment of the amount plus any bank or mailing fees in order to avoid litigation.
“Stop Payment”: If a debtor pays a creditor in the form of a check but then instructs their bank to stop the check, thereby preventing the creditor from receiving the funds, the creditor can issue a “Stop Payment” Demand Letter. The letter will request full payment and to cover costs of bank and mailing fees.
In each of these demand letters, the recipient is advised that if they don’t comply with the demands, legal action will be pursued so the demands are met.
What Is a Cease and Desist Letter?
Simply put, a Cease and Desist Letter (C&D) is a formal notice that requests that a party (an individual, several individuals, or a business) stop a specified action. The letter informs the recipients that if they don’t comply, the issue will be taken to court.
A Cease and Desist Letter can be issued for a variety of reasons. Generally, they are used to demand that someone quit harassing, stalking, libeling, or slandering someone else, but they can also be used to resolve property disputes, e.g. a neighbor’s unkempt tree branches encroaching on another neighbor’s property.
There are some specialized forms of C&Ds:
- A “Debt Collection” letter can be used to cease inappropriate harassment from debt collectors. For example, if a debt collector calls you nonstop at all hours of the day or becomes abusive with profane language to intimidate you into paying.
- A “Copyright Infringement” letter can be used to demand another party (a person or an organization) stop infringing on the intellectual rights of your copyrighted work. This could range anywhere from someone posting your photos on their Instagram or website without giving credit to a competing business stealing your trademarked product ideas.
It should be noted that a Cease and Desist Letter is different than a Cease and Desist Order, which is a legally-binding order issued by a judge to halt illegal activity.
Which Letter Suits Your Situation?
As mentioned above, each letter has its own purpose to fit a variety of scenarios from securing payment to halting harassment. What’s important to remember is that these letters are used to avoid litigation, and, because of their nature as settlement documents, the recipient isn’t required to comply with your demands.
Usually most people are willing to settle out of court because it saves everyone time and money on legal fees, but if you do end up with someone who isn’t satisfied with a letter, you’ll either need to try and negotiate or you’ll have to take your claim to court. If you find yourself in the latter case, be sure you’re prepared with documentation and a good attorney.
Have you ever had to use one of these letters before?