The following Restructuring & Insolvency practice note Produced in partnership with James Hannant of Guildhall Chambers provides comprehensive and up to date legal information covering:
A demand for payment is a formal demand made in accordance with the contractual requirements underpinning the liability which the party issuing the demand is seeking to enforce.
A demand will be necessary where the contract which exists between the parties requires a demand to be made in order for a party’s obligation to make payment to crystallise.
Such a situation is likely to arise in the following circumstances:
where a creditor wishes to realise its security
where there has been a default under an ‘on demand’ facility
where party wishes to rely upon a guarantee; and
where non-payment of a demand equates to an event of default under the contract
The consequences of making a demand may include:
crystallisation of a cause of action which gives rise to a party’s entitlement to commence proceedings
commencement of the limitation period
establishing the date from which a lender’s right to repayment of the loan becomes due; and
establishing the date from which a lender’s right to default or enhanced interest arises
In this Practice Note, the terms ‘borrower’ and ‘lender’ are used to reflect the terms used in the following Precedents in Lexis®PSL:
Facility agreement (term loan): single company borrower—bilateral—with or without security or a guarantee
Demand letter—borrower (together with related drafting notes)
Demand letter—guarantor (together with related drafting notes)
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