How to Write a Settlement Demand Letter

During business transactions, there can be a moment when you find that the other party is going against the agreement and every step to resolve this issue is turning into a futile exercise. Mostly, people decide to seek help from courts which is undoubtedly an effective way but it is also a lengthy process.

Writing a settlement demand letter can be really helpful in these kinds of situations as it can resolve the matter without going into the small claims court. All you need is to draft this notice tactfully so that your addressee gets your message without any ambiguity.

The language of this letter is always formal but direct as there should not be any margin of confusion for the other party. However, being nice does not mean that you show too much leniency.


  • 1

    First of all mention your name followed by the addressee’s complete information at top of the letter. Usually, you place the other party’s name and address on the top left of the page.

  • 2

    Mention the date on which you are sending this notice. It is very important to keep the record of every document in case of litigation.

  • 3

    Then address the other party with proper title. Using “Mr”, “Mrs” or “Ms” is an acceptable way to address.

  • 4

    In the body of letter, you will give brief history of the issue in the opening paragraph. You should not drag the opening rather just stick to the exact figures and facts. Provide complete information of the dispute like amount, date, nature of transaction etc.

  • 5

    In the next paragraph, you should give the other party’s background and the history of your relationship. That will help you to declare the other party responsible for this issue.

  • 6

    Then you will mention the damages and losses. You will have to provide copies of relevant documents to strengthen your point.

  • 7

    Give brief description of the applicable law and then make specific demands for a settlement. You may give them a deadline to compensate you and declare this letter an ultimate notice.

  • 8

    Now it’s time to describe your last step in case of any trouble. You will clearly inform your addressee that any negligence will result into a lawsuit and they will have to pay all the expenditures as well.

  • 9

    In the end, you will provide your contact information which includes telephone numbers, email address and postal address.

  • 10

    Close your letter with proper greetings followed by your name and signature.

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