Updated August 25, 2023
A settlement demand letter is a written offer addressed to a claimant in a dispute. Typically, the claimant has previously sent a demand letter requesting payment for injury or other damages. In the Settlement Demand Letter, a counteroffer is made to try to induce settlement before the matter ends up in court.
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What to Include?
Even if the claimant is not enthused by the counteroffer, there may be a strong incentive to accept, since the alternative could be a lengthy (and costly) legal battle and the risk of walking away with nothing at all.
This is a formal letter that should include:
- A summary of the original incident with any factual disputes highlighted
- Evidence to support the version of events provided in the Settlement Demand Letter
- An outline of any relevant legal standards that apply to the matter
- A settlement offer and terms/timeline for acceptance
How to Offer a Settlement (4 steps)
1. Understand the Claim
The first step is to carefully review the claim. This means grappling with both the factual claims and monetary demands. Remember that the claimant is responsible for establishing facts and law – even if the version of events detailed is correct, it does not necessarily follow that the monetary claims are supported by the law. Scrutinize the evidence and all relevant legal standards.
2. Lay Out the Terms
Be specific when offering a settlement. Clearly indicate financial terms, the timeline for acceptance, and any conditions for this offer.
Often, a settlement will require both parties to sign a confidentiality agreement in which each agrees not to speak about the incident or settlement, and to release all legal claims arising from the incident.
3. Include a Tempting Payout
The key is to make an appealing offer that still undercuts the original demand. You should neither lowball the claimant nor give away the store.
Remember that making a counteroffer does not require acknowledgment of responsibility, so be careful not to write an admission of guilt into the offer that might later be used against you.
Sample
SETTLEMENT DEMAND LETTER
March 14, 2017
Dear Mr. John Parker,
I received your letter, dated March 7, 2017, in which you provided an account of the car accident that we were involved in on February 1, 2017, and requested payment of $1050 for damages resulting from this incident.
Though you indicated that I was fully responsible for the accident, the police report states that no fault could be assigned. I dispute your version of events and accept no responsibility for this incident.
Nonetheless, as a gesture of goodwill, I formally offer $200.00 as a settlement. In exchange, I request that you release any future claims against me arising from this incident.
To accept this offer, please respond in writing by March 28, 2017.
Sincerely,
Paul Lewis