Letter of Demand in South Africa: When and How to Send One

Published by the Lawly team · Published · Sources last checked

General information, not legal advice. Written by the Lawly team from the official sources listed at the end of this guide.

A letter of demand is a written request from a creditor to a debtor to pay an overdue amount by a set date, usually stating what the creditor intends to do if payment doesn't arrive. South African businesses send one when invoices stay unpaid after ordinary reminders. Several Acts refer to a letter of demand: sections 56 to 58 of the Magistrates' Courts Act deal with costs and with debtors who respond in writing, and sections 129 and 130 of the National Credit Act set out a notice process for credit agreements.

What a letter of demand is

A letter of demand puts a payment request on record. It tells the debtor how much is owed, what it's for, how to pay, and by when. Most also say what the creditor plans to do next if the deadline passes, such as handing the matter to an attorney or starting legal proceedings.

The letter is the creditor's own correspondence. You can write and send it yourself, in your own name or your business's name, or have an attorney send it for you. The sections below explain where the difference matters.

When businesses send one

There's no single right moment, but a letter of demand usually follows these steps:

  • the invoice due date has passed
  • friendly reminders by email or phone haven't produced payment or a firm promise to pay
  • you want a clear written record that payment was demanded, and when.

It's also common to send one before deciding whether a debt is worth pursuing further. A firm, specific letter often prompts payment, or at least a conversation about a payment plan.

What a letter of demand usually includes

No Act that this guide checked prescribes a general form for a letter of demand. The items below are the ones businesses commonly include. They are a drafting checklist, not a list of legal requirements.

  1. Your details: your full name or business name, registration number if you have one, address and contact details.
  2. The debtor's details: full name or business name and address, and an ID or registration number if you have it.
  3. The amount owed, as a specific Rand figure.
  4. What the debt is for: the invoice numbers and dates, what was supplied or lent, and when payment was due.
  5. Interest, if you're claiming it: the rate, where it was agreed, and the date it's claimed from.
  6. The deadline: a clear date or number of days for payment.
  7. How to pay: banking details and the reference to use.
  8. What happens next: the step you intend to take if the amount isn't paid by the deadline.
  9. Your signature, name, capacity and the date.

Keep the tone factual. Threats you don't intend to carry out, or statements you can't back up, weaken the letter.

Sending it yourself or through an attorney

Costs of an attorney's letter. Section 56 of the Magistrates' Courts Act 32 of 1944 deals with the cost of a letter of demand. If a debtor pays after "the creditor has caused a registered letter of demand to be sent to the debtor through an attorney", the creditor "shall be entitled to recover from the debtor the fees and costs prescribed in the rules for a registered letter of demand", provided the amount of those fees and costs was stated in the letter. Section 56 refers to a letter sent through an attorney. It doesn't mention letters a creditor sends personally.

Collecting debts for someone else. The Debt Collectors Act 114 of 1998 regulates people who collect debts on behalf of others. Section 1 defines a debt collector to include "a person, other than an attorney or his or her employee or a party to a factoring arrangement, who for reward collects debts owed to another on the latter's behalf". Section 8(1) says that, apart from an attorney or an attorney's employee, no person "shall act as a debt collector unless he or she is registered as a debt collector in terms of this Act". If someone offers to chase your debts for a fee, check their registration with the Council for Debt Collectors.

What happens after the letter

The debtor pays. The matter ends there. Keep a copy of the letter and proof of payment.

The debtor asks for time. Agree a plan in writing. An acknowledgement of debt records the amount and the repayment schedule. The Magistrates' Courts Act deals with written responses after a letter of demand: under section 57(1), a debtor who "has received a letter of demand or has been served with a summons" may admit liability in writing and offer to pay "in instalments or otherwise", and under section 58(1) a debtor may, after receiving a letter of demand or summons, consent in writing to judgment. Both sections ask for particulars of the debtor's income, expenses and other debts when instalments are offered.

The debtor ignores it or disputes it. You decide the next step, which might be to hand the matter to an attorney, consider legal proceedings, or write the debt off. Which route makes sense depends on the amount, the evidence and the debtor's position. For larger amounts, getting advice from an attorney before going to court is sensible.

Letters of demand and prescription

Prescription is the rule that a debt falls away if the creditor doesn't act on it within a set time. Under section 11(d) of the Prescription Act 68 of 1969, most ordinary debts prescribe after "three years in respect of any other debt", "save where an Act of Parliament provides otherwise". Section 12(1) says prescription "shall commence to run as soon as the debt is due", subject to the exceptions in that section.

Two sections of the Act deal with interrupting prescription:

  • Section 14(1): "The running of prescription shall be interrupted by an express or tacit acknowledgement of liability by the debtor."
  • Section 15(1): prescription is interrupted "by the service on the debtor of any process whereby the creditor claims payment of the debt". Section 15(6) says "process" includes a petition, a notice of motion, a rule nisi, a pleading in reconvention, a third party notice and "any document whereby legal proceedings are commenced".

A letter of demand isn't on the section 15(6) list. Don't rely on it to stop the clock. If a debt is approaching three years from its due date, speak to an attorney about your position.

Claiming interest

If you agreed an interest rate with the debtor, for example in your terms and conditions, the letter can claim interest at that rate from the date stated in the agreement.

Where no rate was agreed, the Prescribed Rate of Interest Act 55 of 1975 may be relevant. Section 1(1) applies "If a debt bears interest and the rate at which the interest is to be calculated is not governed by any other law or by an agreement or a trade custom or in any other manner". Under section 1(2)(a), that rate is "the repurchase rate as determined from time to time by the South African Reserve Bank, plus 3,5 percent per annum", and section 1(2)(b) says the Minister publishes the amended rate in the Gazette whenever the repurchase rate changes. Check the current published rate before you state a figure.

For unliquidated debts, meaning amounts that still have to be determined, section 2A(2)(a) says interest runs "from the date on which payment of the debt is claimed by the service on the debtor of a demand or summons, whichever date is the earlier", subject to any other agreement and to the National Credit Act.

Whether a particular debt bears interest, and from when, depends on the facts. If you're unsure, leave interest out or check first.

Credit agreements under the National Credit Act

If the debt arises from a credit agreement covered by the National Credit Act 34 of 2005, the Act sets out a notice process before legal proceedings.

  • Section 129(1)(a): the credit provider may draw the default to the consumer's notice in writing and propose that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, among others, to resolve any dispute or agree a plan to bring the payments up to date.
  • Section 129(1)(b): the credit provider "may not commence any legal proceedings to enforce the agreement" before first providing that notice and meeting the further requirements in section 130.
  • Section 129(5), inserted by the National Credit Amendment Act 19 of 2014: the notice "must be delivered to the consumer" by registered mail, or "to an adult person at the location designated by the consumer". Under section 129(6), the consumer indicates the preferred manner of delivery in writing. Section 129(7) sets out the proof of delivery: written confirmation by the postal service of delivery to the relevant post office or postal agency, or the signature or identifying mark of the person who received it.
  • Section 130(1): a credit provider may approach the court only if the consumer has been in default "for at least 20 business days" and "at least 10 business days have elapsed since the credit provider delivered a notice to the consumer", along with the other conditions in that section.

Whether the Act applies to a particular debt depends on the parties and the terms of the agreement. The National Credit Regulator or an attorney can help with that question.

What to watch for

An amount that doesn't match your records. If the figure in the letter differs from the invoices, the debtor has an easy reason to dispute it. Show how the total is made up.

No clear deadline. "Please pay soon" doesn't tell the debtor when the next step starts. Give a date or a number of days.

Interest you can't support. Claim interest only at a rate that was agreed or that applies by law, and from a date you can explain.

Threatening steps you won't take. Say what you intend to do, and only what you're prepared to do.

Treating the letter as the end of the clock. A letter of demand isn't one of the documents listed in section 15(6) of the Prescription Act. Keep track of when each debt fell due.

Frequently asked questions

Do I have to send a letter of demand before going to court?

For credit agreements under the National Credit Act, section 129(1)(b) says the credit provider may not commence legal proceedings before giving the section 129(1)(a) notice and meeting the requirements of section 130. For other debts, the Acts this guide checked don't set a general requirement. Sections 57 and 58 of the Magistrates' Courts Act and section 56 (costs) do refer to a letter of demand. Speak to an attorney about what applies before you issue a summons.

Can I send a letter of demand myself?

Yes. A letter of demand is the creditor's own correspondence, and you can send it in your own name or your business's name. Section 56 of the Magistrates' Courts Act, which deals with recovering the costs of a letter of demand, refers to a registered letter sent through an attorney.

How long should I give the debtor to pay?

The Acts this guide checked don't set a general period. Many businesses give 7, 14 or 30 days, depending on the amount and the relationship. For credit agreements under the National Credit Act, section 130(1) refers to at least 10 business days after the notice is delivered before the credit provider may approach the court.

Does a letter of demand stop prescription?

Section 15(1) of the Prescription Act says prescription is interrupted by service of "any process whereby the creditor claims payment of the debt", and section 15(6) lists what process includes. A letter of demand isn't on that list. Under section 14(1), an acknowledgement of liability by the debtor does interrupt prescription. If a debt is close to three years old, speak to an attorney.

Can I claim interest in a letter of demand?

You can claim interest at a rate the debtor agreed to. Where no rate was agreed, section 1 of the Prescribed Rate of Interest Act sets the rate that applies if a debt bears interest and nothing else governs the rate. Whether a particular debt bears interest depends on the facts.

What is the difference between a letter of demand and an acknowledgement of debt?

The creditor sends a letter of demand asking the debtor to pay. The debtor signs an acknowledgement of debt confirming what is owed, usually with a repayment plan. A letter of demand often comes first, and an acknowledgement of debt can follow if the debtor asks for time to pay.

Writing a letter of demand with Lawly

Lawly's Letter of Demand is a business document drafted using South African legal frameworks. The questionnaire asks for your details and the debtor's, the amount and what it's for, the due date, the payment deadline and method, any interest, and the step you'll take if the amount isn't paid. The letter is sent by you, in your own name. If the debtor agrees to pay over time, an Acknowledgement of Debt can record the arrangement.

Review the letter carefully before you send it. Check the amount against your invoices and make sure the next step you name is one you intend to take. For larger amounts, or debts under a credit agreement, an attorney review is sensible.

Sources

  1. Magistrates' Courts Act 32 of 1944 (sections 56, 57 and 58), Department of Justice and Constitutional Development
  2. Prescription Act 68 of 1969 (sections 11, 12, 14 and 15), Department of Justice and Constitutional Development
  3. Prescribed Rate of Interest Act 55 of 1975 (sections 1 and 2A), Department of Justice and Constitutional Development
  4. Debt Collectors Act 114 of 1998 (sections 1 and 8), Department of Justice and Constitutional Development
  5. National Credit Act 34 of 2005 (sections 129 and 130), South African Government
  6. National Credit Amendment Act 19 of 2014 (sections 32 and 33, amending sections 129 and 130), Parliament of South Africa
  7. National Credit Regulator, National Credit Regulator
  8. Council for Debt Collectors, Council for Debt Collectors

Disclaimer: This guide is general information about business documentation in South Africa, not legal advice. Lawly is an AI business document generation service, not a law firm. Review any document before you use it, with the depth of review matching what it carries for your business. For advice on your specific situation, speak to a qualified attorney.