My Business Was Sued for Breach of Contract. What Happens Next?

Step one: find the deadline

Look at the citation, the document attached to the petition that tells you the company has been sued. In a Texas district or county court, Texas Rule of Civil Procedure 99 requires the defendant to file a written answer by 10:00 a.m. on the Monday next after the expiration of 20 days after the date of service. Count 20 days from the day after service, then go to the following Monday. If that Monday is a legal holiday, the deadline moves to the next business day under Rule 4. The window is therefore between 21 and 27 days depending on the day of service.

In federal court, Federal Rule of Civil Procedure 12 gives a defendant 21 days after service to answer or file a motion under Rule 12. Justice court cases have their own shorter schedule under the justice court rules. Whichever court it is, calendar the date the day the papers arrive.

Who can answer for the company

A corporation or LLC in a Texas district or county court generally must appear through a licensed attorney; an officer or owner cannot file the answer or try the case for the entity. Justice courts are the exception, where Government Code section 27.031 allows a corporation to appear without an attorney. An answer filed by a non-lawyer for an entity in district court is defective and may not prevent a default. If counsel cannot be retained before the deadline, the deadline still controls, and a litigator should be told the date in the first call.

Step two: preserve everything

From the moment a lawsuit is served, the company has a duty to preserve documents and data relevant to the dispute: the contract and amendments, emails and texts with the other side, internal communications about the deal, invoices and payment records, project files, and the devices and accounts of the people involved. Routine deletion schedules should be suspended for those materials. Texas courts can instruct a jury to presume that destroyed evidence was unfavorable, and can impose harsher sanctions for intentional destruction. The rules are explained in spoliation consequences in Texas.

Step three: notify your insurer

Commercial general liability policies usually exclude pure contract claims, but the petition may plead other theories (negligence, misrepresentation, interference) that trigger a duty to defend, and directors and officers, errors and omissions, or professional liability policies may respond to the contract allegations themselves. Policies require prompt notice, and late notice can forfeit coverage. Send the petition to the broker and every potentially applicable carrier within days, in writing, and keep the acknowledgments. Whether coverage exists is a separate question covered in whether business insurance covers a lawsuit.

The answer: more than a denial

In Texas state court, the answer is usually a general denial under Rule 92, which puts the plaintiff to its proof on every element. But the answer is also where the company must raise anything it wants to use later:

• Affirmative defenses under Rule 94: limitations, statute of frauds, waiver, estoppel, accord and satisfaction, payment, release, prior material breach, failure of a condition precedent and others. An affirmative defense not pleaded is waived. The defenses that matter in contract cases are covered in common defenses when your business is accused of breaching a contract.
• Verified denials under Rule 93 for matters that must be sworn, and the sworn denial required by Rule 185 if the suit is on a sworn account. Without it, the account is treated as proved.
• Special exceptions to force the plaintiff to clarify a vague or defective pleading.
• Counterclaims against the plaintiff, which are generally compulsory if they arise from the same transaction, and third-party claims against anyone who should share responsibility.
• Jurisdiction, venue and arbitration. A challenge to the court's jurisdiction over the company, a motion to transfer venue, or a motion to compel arbitration under an arbitration clause must be raised at the outset, in the correct order, or it can be waived.

Federal court answers follow Rule 8 and Rule 12, with similar consequences for defenses omitted.

What the petition tells you about the case

Texas Rule of Civil Procedure 47 requires the plaintiff to state the category of monetary relief sought. A petition that pleads only monetary relief of $250,000 or less (as of the 2021 amendments; the Supreme Court of Texas proposed raising the figure in 2026) places the case in the expedited actions process under Rule 169, which limits discovery and sets a faster trial schedule. Larger cases fall under discovery Level 2 or 3 under Rule 190, with correspondingly longer discovery periods. The petition's damages category is an early signal of how the case will be run and how much it may cost to defend.

Read the petition for what it does not say as well: whether the plaintiff presented the claim before suing (required for Chapter 38 attorney's fees), whether it pleads performance of conditions precedent, and whether the contract attached is the complete, final version.

The stages after the answer

Initial disclosures and discovery. Both sides exchange the information Rule 194 requires, then conduct written discovery (requests for documents, interrogatories, requests for admission) and depositions. In a contract case the documents usually decide it, and discovery is where each side learns what the other has. Discovery generates most of the cost of litigation.

Mediation. Dallas County and most North Texas courts order mediation before trial. Many contract cases resolve there, after enough discovery has been done for both sides to value the case.

Summary judgment. Where the contract is unambiguous and the facts are documented, either side may move for summary judgment under Rule 166a, asking the court to decide the case or part of it without trial. Contract cases are frequently resolved this way.

Trial. Before a jury or the judge, on the issues that remain. Then judgment, post-judgment motions, and appeal if warranted. The full sequence is laid out in the stages of a commercial lawsuit in Texas.

Example

Suppose a Dallas architecture firm is served on a Wednesday with a petition from a former client alleging the firm breached a design contract by delivering drawings late, seeking the cost of a replacement architect and lost rental income on the delayed building. Twenty days from Thursday ends on a Tuesday; the answer is due at 10:00 a.m. the following Monday, 26 days after service. In the first week the firm retains counsel, suspends email deletion for the project team, sends the petition to its professional liability carrier, and pulls the contract, which has a mutual limitation of liability clause capping damages at the fees paid and a clause requiring mediation before suit. The answer includes a general denial, affirmative defenses of waiver (the client approved every schedule extension in writing) and failure of a condition precedent (no pre-suit mediation), and a motion to abate pending mediation. The liability cap, if enforceable, reshapes the plaintiff's damages claim before any discovery is taken.

What the first month costs the business

A contract suit consumes management time, pulls employees into document collection and later depositions, and can affect banking relationships and deals in progress if it must be disclosed. The early decisions, whether to answer and fight, to answer and negotiate, or to seek an early mediation, are business decisions informed by the strength of the defenses, the plaintiff's ability to prove damages, the fee exposure under Chapter 38 or a fee clause, and the cost of defense. A litigator's first assessment should address each of those, and it should happen before the answer is filed, because the answer sets the terms of everything after it.

Tina Wysk defends Dallas businesses in breach of contract suits in state and federal court, from the answer through trial and appeal.