How to Write a Settlement Demand Letter

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Before suing in small claims court, it is wise to send the party a letter demanding payment or a resolution. A settlement demand letter has many benefits. For instance, a letter can result in successful negotiation to resolve the dispute. Thus, you may avoid going through litigation to receive your money or property. Generally, the settlement demand letter consists of a one typed-written page to an opposing party.

Place the opposing party's information at the top of the letter. Typically, the information, which includes the name and address, goes on the left side of the page.

Include the date. The date can go on the left side under the party's personal information or on the right side.

Read More: How to Write a Demand Letter for Payment

Address the opposing party. For instance, you can use a courtesy title such as "Mr." or "Ms." and then the name.

Write a brief history of the dispute Explain how and when the dispute occurred in chronological order. Keep the history approximately one paragraph in length.

Transcribe the type of settlement you're offering. For example, you can include the amount of money owed or if you want them to return or fix property. If you are willing to accept a lower amount than what's owed, then specify that. Also, include the timeframe the party has to accept the offer or negotiate a different settlement.

Indicate the next step to resolve the dispute if there is no compromise. You can, for instance, inform the opposing party that you intend to file a lawsuit in small claims court if no settlement is reached.

Conclude the letter with contract information. Tell the opposing party how to reach you such as by telephone, letter or email to resolve the dispute.

End the letter. You want to write a closing such as "sincerely" along with your name at the end of the letter. You also need to sign the letter under your name.


  • Don't use negative language in the letter. Using threatening or disparaging language can lessen the chances of receiving your settlement. Also, if you do go to court, a judge may read the letter and may view as antagonistic.


  • Keep several copies of your letter. You may need a copy as evidence when filing your lawsuit.
  • You want to provide a brief history in case the dispute goes to small claims court. Although the other party knows what happened before the settlement offer, a judge or clerk of court doesn't. Thus, a brief history provides a clerk of courts or judge with an understanding of the dispute.