The Case Against Posturing in Letters of Demand

Letters of demand are essentially a call to action backed up with a worse alternative of litigation or some form of adversarial process. Potential clients often request for letters of demand to be sent when they want to get the other side's attention, and they want to adopt an aggressive posture to shock the other side into compliance. However, many such letters are essentially a display of position which are unlikely to produce the intended result.

Managing expectations is important. Letters of demand often do not have a significant impact on resolving a dispute, for the following reasons:

1. It has very little bearing on how the case proceeds, unless the other party flips and flops on his position and one can argue that he is not a reliable witness. But that requires one to go to trial, which would take on average at least a year or two.

2. If the other party is used to getting letters of demand, there is not much shock and awe value in a law firm's letterhead. Of course, certain firms have a certain reputation and therefore present a much more credible concern, but failure to follow up will cause a hit to one's own credibility. Nobody wants to be the boy who cried wolf.

3. One cannot squeeze blood from a stone, and one cannot scare money out of an insolvent party.

However letters of demand can prompt the other party to respond or engage, as long as the following conditions are met:

1. The letter clearly identifies the client. and clearly sets out allegations against the recipient, which the client would be entitled to make in court. This point sometimes gets lost in situations where several individuals and corporate entities are involved in several transactions or a longstanding relationship, and it's important to be discerning. Otherwise the recipient may deflect the letter by taking the position that it has no relationship with the sender.

2. It clearly sets out what the client wants. This helps the other counsel see whether there is a zone of possible agreement, or even infer what the sender's real interests are.

3. Most importantly, it presents an alternative (usually litigation or arbitration), which is assumed to be worse for the recipient.

In order to motivate the recipient to capitulate the demand, it is common for letters of demand to be worded aggressively, in terms of the allegations or the outcome sought. This is essentially posturing - to show that the client has a clear and strong case and that the recipient is better off giving in. The lawyer gets to also show that he is a fighter and that he will pursue his client's interests to the full extent, so what's wrong with highly positional letters of demand?

I am not a big fan of posturing for a handful of reasons:

1. With overly aggressive and lengthy letters, the recipient may get so put-off or scared that he seeks legal advice (and if he is insolvent, he might apply for legal aid).

2. With that comes the attendant risk that the opposing lawyer will start poking holes in the letter of demand, either by flatly denying the allegations or adding to the mix by mounting their own counterclaim. There are many possible motivations for such behaviour - to demonstrate their worth to their client, to repel the other party or to force a stand-off and induce parties to settle.

3. However it is more likely that the dispute will escalate into formal, adversarial proceedings, depending on the degree of aggression, since litigation will no longer appear to to be the worse alternative. At the same time, it damages the prospects of an earlier, amicable settlement, as parties need time to calm down and reconsider their options - not everyone can be coldly rational in the face of aggression.

A clear and effective demand does not necessarily mean a strident tone or a barrage of allegations. Sometimes, less is more and some of us prefer to get straight to the point. (I also wonder if there is a financial incentive to draft lengthy letters - definitely not for those who operate on a fixed price model!) Of course, it's easier to persuade a client to include a without-prejudice offer in correspondence if the other side doesn't appear strident. There is much more potential for the dispute to be resolved sooner when we adopt the appropriate tone and posture.