Someone Sent My Business a Demand Letter. Should I Respond?

Is a demand letter legally binding?

No. A demand letter is a private communication from one party, or that party's lawyer, to another. It is not a court filing, it is not a summons, and no judge has read it. Nothing in Texas law requires a recipient to answer a demand letter, and failing to answer does not by itself create liability.

That said, a demand letter is often the last step before a lawsuit, and some letters do start statutory clocks. Treating one as junk mail is a decision with consequences, which is covered separately in what happens if you ignore a demand letter. This article is about the decision itself: whether a response serves you.

Why responding is usually the better choice

Three reasons apply to most business disputes in Texas.

Attorney's fees. Under Texas Civil Practice and Remedies Code § 38.002, a party who later wins a claim for breach of contract, services rendered or a sworn account can recover attorney's fees only if the claim was presented and the amount owed was not tendered within 30 days. A demand letter is the usual way a claim is presented. If any part of the claim is valid, a well-timed response or tender can limit how much of the other side's legal bill ends up on your account.

Settlement is cheaper before suit. Once a petition is filed, both sides spend money on pleadings, discovery and hearings before anyone talks numbers again. A response that opens a conversation, even a firm one, keeps the cheapest window open.

The record starts now. If the dispute does go to court, the letters exchanged before suit will be among the first exhibits. A clear statement of your position, written when the facts are fresh, is worth having. Silence lets the other side's version stand alone.

When not responding, or not yet, is the right call

Sometimes a pause is the best response. Common situations:

• The letter is addressed to the wrong party. If it names you personally for a company debt, or names a company you no longer own, the first question is whether you are the right recipient at all. A response that engages with the merits can blur that line.
• Insurance may cover it. Many commercial general liability, professional liability and directors-and-officers policies require prompt notice of a claim, and some define a demand letter as a claim. Notifying the carrier first may be a policy condition, and the carrier may want to control the response.
• The letter is a fishing expedition. A letter that asks you to explain yourself, produce documents or confirm facts, without stating a specific claim, is asking you to build the other side's case. There is no obligation to do that.
• A lawyer is already involved on your side. Once you have counsel, communications should go through counsel. A direct response can undercut the position your lawyer is building.

None of these means ignoring the letter. They mean deciding, deliberately, that the first move is something other than a reply to the sender.

What the letter tells you before you answer

Read it twice, then answer four questions:

1. What exactly is demanded? A dollar figure, a specific action (stop using a name, return property, perform a contract), or just an invitation to talk.
2. What legal theory is named? Breach of contract, fraud, trade secret misappropriation, a Deceptive Trade Practices Act claim. Each carries different deadlines and exposure. A DTPA letter in particular must give 60 days' notice under Texas Business and Commerce Code § 17.505, and the sender's own notice obligations are explained in the 60-day DTPA notice letter.
3. Is any of it true? If the invoice really is unpaid or the deadline really was missed, the strategy is different from a letter built on a misunderstanding.
4. Who sent it? A letter from a litigation firm with a draft petition attached signals a different level of commitment than a letter from the business owner or a collections agency.

Example

Suppose a Dallas distributor receives a letter from a supplier's lawyer demanding $48,000 for goods delivered over six months, with a 10-day deadline. The distributor's records show $31,000 is genuinely owed and $17,000 is disputed because two shipments arrived damaged. Not responding leaves the whole $48,000 on the table plus, after 30 days, exposure to the supplier's attorney's fees under § 38.002. A response that tenders the undisputed $31,000 and states, with photographs, why the rest is disputed changes the case before it starts. The supplier now has to decide whether $17,000 is worth a lawsuit.

Can my response be used against me?

Yes, parts of it can. Texas Rule of Evidence 408 keeps offers of compromise, and statements made during compromise negotiations, out of evidence when they are offered to prove the validity or amount of a disputed claim. It does not turn a letter into a shield for everything in it. Factual admissions can be used for other purposes, and a response that was not actually part of a negotiation may not be protected at all.

This is the main reason the question "should I respond?" so often becomes "who should respond?" A response drafted by someone who knows what Rule 408 covers, and what it does not, can be firm and specific without handing the other side evidence. The method is covered in how to respond to a demand letter without making it worse.

Does the deadline in the letter change the answer?

Usually not by much. A deadline chosen by the sender is a negotiating position, not a legal one, with some exceptions for statutory notice periods and contractual cure periods. Whether a stated deadline binds you is a separate question, answered in whether the deadline in a demand letter is real. What a short deadline does tell you is that the sender wants a quick reaction. A short, polite acknowledgment that you have received the letter and will respond substantively by a date you choose is almost always available, and it costs nothing.

When a litigator should see the letter first

Some letters warrant a lawyer's review before any reply, because the downside of a misstep is large:

• The amount demanded is significant for the business, or the letter seeks an injunction, the return of property or a stop to part of your operations.
• The letter alleges fraud, breach of fiduciary duty, trade secret theft or a non-compete violation, where early admissions are hard to undo.
• You suspect you owe part of what is claimed and want to resolve that part without conceding the rest.
• The sender is a former partner, investor or key employee, where the letter is one move in a larger dispute.

In those cases a litigator's first job is not to write a fierce reply. It is to read the letter against your documents, assess exposure, decide on insurance notice, and set the tone that gives you the most room later. Tina Wysk reviews and answers demand letters for Dallas businesses on both the sending and receiving side as part of her demand letter and pre-suit practice.

What you can safely do today

• Note the date you received the letter and how it arrived.
• Pull the contract, invoices, emails and texts the letter refers to. Do not edit, delete or reorganize anything.
• Check your insurance policies for claim-notice requirements.
• Do not call the sender's lawyer to argue the facts. If you want to acknowledge receipt, do it in two sentences, in writing.
• Decide who will respond and by when, and write that date down before the sender's deadline arrives.