How to Make Proper Use of Letters of Demand


Securing new work or business these days can be tough, especially considering many people wanting access to their goods or services immediately, yet payment for said goods or services to be broken down into instalments. It is because of this that businesses often find themselves stepping into potential financial landmines in doing work-before-pay transactions. What if your Debtor defaults on a Credit Agreement Payment? Is there a way to inform them that you are serious about getting what is rightfully due to you while still allowing a possible business relationship to continue after the debt has been paid?

Letters of Demand

A Letter of Demand can be used to provide a Debtor with written notice that they have defaulted on payment. As per Section 129 of the National Credit Act 34 of 2005 (the ‘Act), as amended, a Letter of Demand is to be issued and delivered to a Debtor before any further formal legal proceedings can be instituted. In terms of the content, this notice would serve as an indication to the Debtor as to the amount outstanding and the reasoning therefore. Section 129 of the Act also stipulates that such a letter draws the Debtor’s attention to alternative options such as the use of a Debt Counsellor, Alternative Dispute Resolution Agent, the use of the Consumer Court or Ombudsman, with the intention of seeking out a mutually satisfying resolution to bring payments up to date.

National Credit Act

Furthermore, the Act as per Section 130, stipulates that a Court may only be approached to enforce a Credit Agreement if a Debtor has been in default for a period of at least 20 business days and at least 10 business days have passed since the Letter of Demand was delivered. The Court may not allow any formal proceedings to be instituted if the Debtor has referred the matter to a Debt Counsellor, Alternative Dispute Resolution Agent or if the matter is before the Consumer Court or Ombudsman with the proper jurisdiction. If no such scenario exists, the Court will then be able to contemplate the necessary facts as well as look for satisfaction that such Debtor was properly notified of their indebtedness before allowing property to be attached to satisfy the outstanding debt.


A Letter of Demand can therefore be a great tool for a business to use in order to collect outstanding debt. On the one hand it does not have any final consequence attached to it except for informing the Debtor of his indebtedness. This would allow for a grace period whereby the Debtor would be able to address any arrears and restore the working relationship between the parties without feeling judicial pressure. On the other hand, if the Debtor continues to fail to address such arrears, the Letter would be able to help inform the Court that the Debtor was made aware of this and still chose to ignore or refute payments, avoiding any unfair action to be taken against them.

Contact SchoemanLaw Inc today for expert advice for all your SME needs. For further assistance with Letters of Demand visit our SME Self-Service Desk where one can be purchased for R195 (VAT inclusive)

This article was written by SchoemanLaw, partners of Workshop17, for publication on the Workshop17 blog.