"Letter of demand" is a general term which describes any letter from one party to another demanding that the second party either take a particular action or not take that action. 

In business, the issuing of letters of demand is a regular occurrence. It is the normal preliminary step to commencing court proceedings. 

The simplest letter of demand is for payment of money. Demands can also cover any type of contractual breach or other breakdown in a business relationship. 

Letters of demand can also be used in non-business disputes, such as between neighbours. 

As the name indicates, a letter of demand simply demands what the party issuing it wants and claims to be entitled to. There is no law which specifies what letters of demand generally must say or contain, and in many cases they have no legal status. They can however have a significant impact on the parties’ legal rights, and can damage a party’s position if incorrectly drafted. 

The first step in drafting a letter of demand will be to consider whether there is any formal requirement for its contents. The most important place to look is the contract, if there is one. Many contracts specify what a demand must contain, and other matters such as where it should be sent. If the letter does not comply with the contractual requirements, it will be ineffective. If this happens, the party issuing it may not have the right to commence proceedings. 

These general principles should always be followed.

• Check the contract and follow its requirements to the letter.
• State specifically the details of the breach and what the recipient is required to do (eg pay money, stop throwing rubbish over your fence, etc). 
• Allow a reasonable time period for the recipient to comply with the demand. What is reasonable will vary widely. In some case as little as a few hours might be appropriate. For payment of money, seven days is generally a minimum. 
• State what will happen if the demand is not complied with. 
• Make sure you can prove that the letter of demand was served on the recipient. Again, check the contract for any requirements in this regard. 

There are a number of other principles to be taken into account, and of course you should always give serious consideration to whether to seek legal advice before issuing a demand at all.