Letter of demand to a debtor in Lithuania: is it required, what it changes

As a general rule, a letter of demand (pretenzija) is not required before you go to court over a debt. A mandatory out-of-court pre-trial procedure can be set only by law (Article 22(1) of the Code of Civil Procedure (CPK)). A written demand for payment does, however, have legal effects. If no payment date was set, the period for payment runs from the demand (Article 6.53(2) of the Civil Code (CK)) and the limitation period begins (CK Article 1.127(3)). The letter itself does not interrupt the limitation period, but acts by which the debtor acknowledges the debt do (CK Article 1.130(2)).

We explained briefly why a letter of demand is worth sending, and which documents the court will need, in How long do you have to recover a debt in court, and what documents do you need?. Here: what a letter of demand changes for the creditor.

Is a letter of demand required before going to court?

CPK Article 22(1) provides that a mandatory out-of-court pre-trial dispute procedure may be set in the cases provided for by law. Where the law sets such a procedure and it is not followed, the court refuses to accept the statement of claim (CPK Article 137(2)(3)) or leaves the application unexamined if that procedure can still be used (CPK Article 296(1)(1)).

A letter of demand appears neither in the list of what an application for a court order must contain (CPK Article 433(1)) nor in the list of what a statement of claim must contain (CPK Article 135(1)). So for an ordinary money claim under a contract you may go to court without one. A letter of demand is worth sending for its legal effects, described below.

When the debtor is in breach

If a payment date was set in the contract or the invoice, the debtor is in breach when it misses that date (CK Article 6.63(1)(2)). A letter of demand does not change that date.

If no date was set, the creditor may demand performance at any time (CK Article 6.53(1)). The debtor must perform within seven days of the demand, unless a different period is clear from the law or the nature of the contract (CK Article 6.53(2)). The debtor is in breach from the moment the creditor demanded performance in writing and set a deadline, and the debtor did not perform within it (CK Article 6.63(3)). So send the letter in writing and state a deadline for payment in it. Since CK Article 6.53(2) gives the debtor seven days from the demand, the deadline should not be shorter, unless a different period is clear from the law or the nature of the contract.

Interest. A debtor who misses the deadline for a money obligation pays annual interest at the rate set by law, unless the law or the contract sets a different rate (CK Article 6.210(1) and (2)). Where no date was set, the deadline is missed when the deadline set in the written demand for performance has passed (CK Article 6.63(3)). Procedural interest is different: it runs from the opening of the court case, not from the letter of demand (CK Article 6.37(2)).

Commercial contracts between businesses. The Law on the Prevention of Late Payments in Commercial Contracts (MĮSVAĮ) gives a right to interest without any warning to the debtor once the payment periods set in the law have passed, if the creditor has performed its own obligations and has not received the amount due on time, unless the debtor is not responsible for the delay (MĮSVAĮ Article 3(1)). If the contract sets no payment date or period, interest runs once 30 calendar days have passed from the day the debtor receives the invoice or an equivalent document (MĮSVAĮ Article 4(2)(1)), and in the cases in MĮSVAĮ Article 4(2)(2)-(4), for example where the date of receipt of the invoice is uncertain, once 30 calendar days have passed from the day the goods were received, the services provided or the works performed (or accepted or verified). The fixed compensation in the amount set by the law is also due without warning (MĮSVAĮ Article 7(1)). So in these contracts no letter of demand is needed for interest, but it is still useful for limitation and evidence.

Does a letter of demand interrupt or suspend limitation?

No. The limitation period is interrupted by filing a statement of claim in the manner set by law (CK Article 1.130(1)) and by acts of the debtor showing that it acknowledges the obligation (CK Article 1.130(2)). A creditor’s letter is not among these grounds. Nor is it among the grounds for suspending limitation (CK Article 1.129(1)).

Two steps follow from this:

• Ask the debtor to confirm the debt in writing, for example by signing a reconciliation statement. If the debtor acknowledges the debt, the limitation period starts again, and the time that ran before the interruption does not count towards the new period (CK Article 1.130(3)). Keep every such reply.
• Keep proof that the letter was delivered. Where no date for performance was set, the limitation period begins at the moment the demand for performance is made (CK Article 1.127(3)). The date of the letter then becomes the start of the limitation period.

The letter of demand and the costs of the case

CPK Article 434(4) provides: if the claimant could have obtained a court order in the simplified procedure but filed an ordinary statement of claim, stamp duty and other costs are awarded only on the part of the claim that the defendant disputed. The exception is where the defendant’s conduct gave the claimant grounds to believe that the defendant would dispute the claim. The debtor’s reply to your letter of demand is its conduct before the case. If it disputes the debt, keep it.

Costs of preparing the letter:

• Losses include reasonable costs of recovering losses out of court (CK Article 6.249(4)(3)).
• In commercial contracts, on top of the fixed compensation, the creditor may claim all further recovery costs related to the late payment, including lawyers’ fees and the costs of recovering losses out of court (MĮSVAĮ Article 7(2)).
• Unless the parties agreed otherwise, the debtor’s payments go first to the creditor’s costs of making the demand for performance (CK Article 6.54(1)).

The court awards the party that wins the costs of a lawyer’s or assistant lawyer’s help in the case under CPK Article 98(1). The request, with the calculation and justification of the costs, and the evidence of their amount must be filed with the court in writing before the end of the hearing on the merits. CPK Article 98(1) does not name a letter of demand. You may claim the cost of preparing it as losses (CK Article 6.249(4)(3)) or, in commercial contracts, as recovery costs (MĮSVAĮ Article 7(2)). Include it in the amount claimed in the application or statement of claim.

What to put in the letter of demand

• The parties. Names, registration or personal codes and addresses of the creditor and the debtor.
• The basis of the debt. The contract, the order, invoice numbers and dates, delivery certificates.
• The amount and how it is calculated. If you claim interest or default interest, state the rate, the amount and the period. CPK Article 433(1)(4) requires the same in an application for a court order, so you will not need to calculate again later.
• A deadline for payment. Where no payment date was set, it should be no less than seven days, unless a different period is clear from the law or the nature of the contract (CK Article 6.53(2)), and it fixes when the debtor is in breach (CK Article 6.63(3)).
• Payment details.
• A request to confirm the debt in writing (because of CK Article 1.130(2)).
• What happens when the deadline passes, for example going to court.

If you also want to terminate the contract, the notice may set a reasonable additional period and state that the contract will be terminated unilaterally if the debtor does not perform within it (CK Article 6.209(3)). How to do this is described in Debtor not paying under a contract: what to claim and who is liable.

Read the debtor’s reply carefully. If, at the time you apply, you have not performed your own obligation (or part of it) for which you claim payment, and the debtor demands that you perform it, the application is not examined in the court order procedure (CPK Article 431(2)(1)).

How to prove the letter was delivered

CK Article 6.63(3) requires the demand to be in writing. Both the payment deadline and the start of limitation may depend on its date. So choose a method whose delivery you can prove:

• registered post with confirmation of delivery;
• email to the address the debtor used to correspond with you about the contract, and keep its reply;
• for a legal entity, its electronic delivery box. Its address must be stated in the legal entity’s documents (CK Article 2.44(1)(4)).

No evidence is attached to an application for a court order (CPK Article 433(3)). The application must, however, state the evidence that can support the claim (CPK Article 433(1)(6)). Documents and other evidence on which the claim is based are attached to a statement of claim (CPK Article 135(2)). Keep the letter of demand and the proof of delivery together with the contract and the invoices.

More on debt recovery

• Debt recovery in court: service page
• Debt limitation period in Lithuania: start, interruption, renewal
• Interest and late-payment penalties in Lithuania: what the law allows
• Court order, documentary procedure or claim in Lithuania: which to choose

How to start

Send us the contract, the invoices, your correspondence with the debtor and, if you have already sent one, the letter of demand with proof of delivery. We will prepare the letter of demand or assess whether to go to court straight away.

Phone +370 5 212 1506, email info@linden.lt

More about this service: debt recovery in court.