For many legal proceedings, a demand letter is mandatory. If you forget to send it, you could lose your case in court. Therefore, it is always a good idea to send one prior to instituting legal proceedings. Additionally, in many instances, it actually encourages the recipient to settle the dispute out of court and saves legal fees.
It is important to note that sending a demand letter does not require the sender to actually sue or take up other legal action against the recipient. If the recipient does not respond after delivery of the demand letter, or refuses to perform the legal obligations set forth in the letter, the decision on taking the matter to court rests with the sender.