Open Account | Construction Law Monitor

Louisiana Demand Letter Templates

On April 26, 2010

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When an account is unpaid and overdue, you do not want to rush into filing a lawsuit. Litigation is an expensive, and oftentimes unnecessary remedy (but, don’t let your claims prescribe). A well-drafted demand letter should be sent to non-paying parties before proceeding forward with legal action.

Although it may be recommended to send a demand letter, it is not a requirement under Louisiana law to establish a commercial debt action (it is in some states). It’s logical, however, that if the debtor may pay within 10 – 30 days of demand, there is little benefit to spending the time and money on initiating a lawsuit.

This post provides a few sample demand letter templates.

In reviewing these templates, it’s important to remember that different situations call for different measures, and specifically that one demand letter may apply more correctly than another.

Furthermore, in certain circumstances (when a check is returned NSF, when an account is an open account, etc.), there are statutory requirements for sending a demand letter in order to qualify for statutory penalties.

The counsel of a qualified attorney is recommended when taking a past-due account to the next level, however, there is some benefit ($$) to sending a demand letter in-house before handing off the reigns to your attorney.

Once you hire an attorney, he or she will likely begin the representation with a new demand letter, but your original letter will not be in vein. The in-house demand letter, when prepared and sent correctly, may qualify you for collection of interests and penalties from the time of its sending, and as mentioned above, may even result in payment. The attorney letter will ensure that the statutory requirements are met, and they are generally more threatening than in-house letters.

Finally, regardless of the correspondence you are prone to send, there are some essential considerations you should have when sending a demand letter.

Be sure to enclose information about the debt with your letter, which may include invoices, estimates, contracts, photographs, etc.

This not only gives creditability to the recipient of your demand letter, showing you are able to prove your debt, but it gives the recipient less of an excuse for non-payment. While not bulletproof, if the matter goes to court and you have a well-written demand letter with documentation proving the debt, you’ll have a better position to argue that the debtor was wrong for not making payment.

From a practical standpoint, there are other things you want to keep in mind. Most importantly, sending a demand letter is of little use unless you can prove it was sent and received.

Send the letter Certified Mail with Return Receipt Requested, and keep track of the Certified Mail Number. Follow-up to ensure the letter is delivered, and if needed, even make an effort to have the letter hand delivered by courier (who should sign an affidavit of delivery).

Not only should you keep proof of the sending of the document, but you want a good and reliable copy of what was sent. If you have a letter and enclosures, mention the enclosures within the letter so you can prove that they were in fact enclosed. Scan a copy of all the documents together with the certified mail number, bates stamp the documents or put page numbers at the bottom of each page (1 of 6, 2 of 6, etc.).

General Collection Letter Template

Contractors seeking to collect amounts owed to it from a property owner should send a basic collections letter. Here is a basic collections letter in Microsoft Word format.

Demand letter on An Open Account Template

If you have an “open account” with the debtor, you will want to send a demand letter substantially similar to the template below. Open Accounts are provided special treatment under Louisiana law, with the benefit to creditors being that they are able to collect interest and attorneys fees as a matter of law.

The critical questions when collecting an open account are: (1) Is the debt an open account?; and (2) Has the creditor taken the correct steps to collect on it, preserving its rights to obtain attorneys fees and interest?

In general, contractors are infrequently able to capitalize on the open account laws in Louisiana, which are more ordinarily preserved to other professions and types of accounts. However, construction material suppliers are frequently able to use the open account laws, and there is clearly some grey area on the issue pursuant to recent Louisiana Supreme Court decisions.

Regarding the second question, the Louisiana Open Account law requires that you send a demand letter before qualifying to collect attorneys’ fees and interest. The demand letter must give the debtor information regarding the debt (invoices, contracts, estimates, photographs, etc.), and it must provide them with a certain amount of time to make payment on the account (30 days).

A demand letter in substantially similar form to the form provided by this post should suffice to start the clock for your company under Open Account laws. Be sure, however, to enclose evidence of the debt with the letter, and to keep documentation to prove that it was sent and to prove exactly what was sent.

Demand on Open Account in Microsoft Word format.

Demand letter on NSF / Dishonored Check

The penalties for writing an NSF check can be severe. If your company seeks re-payment of the NSF check in accordance with Louisiana statutes, it will be positioned to take advantage of these penalties, applying great pressure to the party who wrote the NSF check to make payment.

The following is a sample template letter that may be sent after receipt of a NSF check.

Demand on NSF Check in Microsoft Word format.

Demand Letter Against Contractor Who Misapplied Funds

When a contractor misapplies funds as above discussed, you may send this template letter to put that contractor on notice of its default and to demand payment under the statute.

Demand Against Contractor Who Misapplied Funds in Microsoft Word format.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Construction Law Blog.

Posted in: Collections / Tags: Demand Letters, Louisiana, Louisiana Construction Law Blog, Misapplication of Funds, NSF Checks, Open Account / 2 Comments

Are All Construction Contracts Open Accounts in Louisiana?

On April 16, 2009

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In February 2008, the Louisiana Supreme Court decided Frey Plumbing Co., Inc. v. Celeste Foster, 996 So.2d 969, which dealt with the question of whether an agreement between a homeowner and a plumber was an “open account” or a construction contract.

Distinguishing between open accounts and construction contracts is important for a number of reasons, and namely because one can statutorily recover attorneys fees and interest under Louisiana open account law.

At trial level, the court granted the homeowner’s summary judgment, agreeing that that plumbing agreement was a “construction contract” and not an open account. The trial and La. 4th Circuit based its decision on a jurisprudential “factors test.”

In Frey, the Supreme Court reversed this decision, and overruled all cases in Louisiana that relied on these “factors” to determine whether an agreement is a contract or an open account. The Supreme Court stated that the statute (§9:2781) must be simply applied as written.

Here is how “open accounts” are defined in the statute:

‘Open account’ includes any account forth which a part or all of the balance is past due, whether or not the account reflects one or more transactions and whether or not at the time of contracting the parties expected future transactions. ‘Open account’ shall include debts incurred for professional services, including but not limited to legal and medial services.

The defendant in Frey warned that such a liberal reading of the statute would be problematic:

Frey reads out the repeated references to ‘open account’ and ‘account’ and would have this Court hold that all unpaid debts fall within the purview of the statute. Frey’s interpretation of the statute is contrary to well established principals of statutory construction and leads to absurd results clearly unintended by the Legislature.

The Plaintiff in Frey didn’t deny this allegation, saying instead that there’s no explanation or indication that “this is not what the legislature mandated pursuant to the express provisions of the open account statute.”

The Louisiana Supreme Court did not comment on the debate between the parties as to the exact broadness of the open account statute. However, the court did make it clear that construction agreements are not automatically exempt from open account analysis.

The prior “analysis” was trashed, and the court now requires that the facts of the case be applied to the plain language of 9:2781(D).

The Frey decision dealt with an unwritten plumbing agreement that was billed to the property owner after the work was complete. Wolfe Law Group just this week filed a memorandum with the 22nd Judicial District Court analyzing the Frey decision and how it might apply to a more traditional lump-sum construction contract.

The memorandum can be read on JDSupra here.

We’ll update with the judge’s decision when received.

Posted in: Construction Contracts, Louisiana / Tags: Frey Plumbing Co. Inc. v. Celeste Foster, JDSupra, Louisiana, Louisiana Supreme Court, Open Account / Leave a comment

Posts Tagged ‘Open Account’

Louisiana Demand Letter Templates

General Collection Letter Template

Demand letter on An Open Account Template

Demand letter on NSF / Dishonored Check

Demand Letter Against Contractor Who Misapplied Funds

Are All Construction Contracts Open Accounts in Louisiana?

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