Usually disputes don't happen out of the blue, usually things lead up to them. If the parties positions are clear what is the point of a formal demand letter before suing?
For example if person x sent an invoice to company y and they are ignoring his messages and phone calls, why not go straight to court instead of sending one more letter?
Can a demand letter be limiting if the plaintiff changes their mind about the compensation or charges? For example if the plaintiff sends a demand letter for $1000 can they change their mind to $2000 when going to court?