Responding to a
demand letter.

By Jonathan Kleiman, Barrister & Solicitor · Published May 2026

What a demand letter actually means

A demand letter is a formal written notice from someone — usually a lawyer — claiming that you owe them money, breached a contract, or caused them a loss. It sets out the facts as they see them, identifies a legal basis for their claim, demands a specific remedy, and gives you a deadline to respond.

A demand letter is not a lawsuit. It is not a court order. No judge has reviewed the claims, and nothing has been filed. It is the sender's opening position — and it is negotiable.

That said, it is serious. A demand letter from a lawyer signals that the sender has consulted counsel, had their claim professionally assessed, and is prepared to litigate if you do not respond. If you want to understand what goes into one, see our companion guide on how to write a demand letter in Ontario.

Step 1 — Read it carefully (and do not respond immediately)

Your first instinct may be to fire off a reply or call the sender to argue. Resist that. Anything you say or write can be used as evidence if the matter goes to court.

Read the letter from start to finish. Note the following:

• Who sent it — is it from a lawyer, or from the person directly?
• What they claim happened — are the facts accurate, partially accurate, or wrong?
• What they want — a specific dollar amount? An action? An apology?
• The deadline — how much time do you have to respond?
• The consequence — what do they say they will do if you do not comply?

Write down your version of events while it is fresh. Gather any relevant documents — contracts, invoices, emails, texts, receipts. This is the foundation of your response.

Step 2 — Assess whether the claim has merit

Not every demand letter is well-founded. Some are aggressive negotiation tactics. Some overstate the claim. Some misstate the law. Before deciding how to respond, you need an honest assessment of whether the sender has a legitimate claim against you.

Ask yourself:

• Did I actually do what they are claiming? Is there a breach of contract?
• Do I owe this amount, or is it inflated?
• Do I have a defence — was the contract unclear, was performance impossible, did the other party breach first?
• Is the claim within the two-year limitation period under Ontario's Limitations Act, 2002?

If you are unsure, this is the point where a contract dispute lawyer can help you evaluate the claim before you commit to a response strategy.

Step 3 — Choose your response strategy

You generally have four options. The right one depends on the strength of the claim, the amount at stake, and your relationship with the sender.

Option A — Pay the full amount

If the claim is valid and the amount is correct, paying promptly is often the smartest move. It avoids court costs, legal fees, and the time cost of litigation. If you pay, get a written confirmation that the matter is fully resolved — a simple release or settlement letter signed by both parties.

Option B — Negotiate

This is the most common outcome. You respond in writing, acknowledge the dispute, but propose different terms — a lower amount, a payment plan, or a resolution that addresses both sides' concerns. Most demand letters are the beginning of a negotiation, not the end.

Option C — Dispute the claim

If the facts are wrong, the legal basis is flawed, or you have a valid defence, you can respond with a written denial. Set out your version of the facts, identify why you disagree, and attach supporting documents. A well-crafted denial often ends the matter — or at least shifts the negotiation in your favour.

Option D — Ignore it

This is almost always a mistake. If you ignore the letter, the sender will likely file a claim in Small Claims Court (for disputes up to $50,000) or Superior Court. You will then receive a Plaintiff's Claim, and the deadlines become court-imposed — and non-negotiable. Ignoring a demand letter does not make the problem go away. It makes it more expensive.

How to write your response

Whether you are negotiating, disputing, or accepting the claim, your response should be in writing. An email or letter — not a phone call. Written responses create a record and prevent misunderstandings.

Your response should include:

1. A reference to their letter — date received, sender, subject matter
2. Your position — clearly stated: you accept, you dispute, or you propose an alternative
3. Your version of the facts — if they differ from the sender's account
4. Supporting documents — contracts, receipts, emails, or anything that supports your position
5. A proposed resolution — what you are willing to do, and by when

Keep the tone professional. Do not threaten, insult, or use emotional language — everything you write may be shown to a judge.

Common mistakes when responding to a demand letter

• Responding emotionally — angry emails written at midnight become evidence. Wait, think, then write.
• Admitting fault unnecessarily — saying "I know I messed up, but…" in writing can be used against you. State facts, not concessions.
• Ignoring the deadline — even if the deadline is not legally binding, missing it signals that you are not taking the matter seriously.
• Calling instead of writing — verbal conversations are hard to prove and easy to misremember. Always respond in writing.
• Making promises you cannot keep — do not agree to a payment plan you cannot afford. Defaulting on a settlement agreement is worse than the original dispute.
• Posting about it online — social media posts about the dispute can be discovered and used as evidence. Say nothing publicly.

When to get a lawyer involved

You do not need a lawyer for every demand letter. If the amount is small, the facts are clear, and you know your position, you can respond on your own.

But consider getting a lawyer involved if:

• The demand is for a significant amount — the cost of a wrong response exceeds the cost of legal advice
• The letter comes from a lawyer — you are at a disadvantage negotiating without representation
• The facts are complex or disputed — you are not sure whether the claim has merit
• You have a counterclaim — the sender may actually owe you money
• The limitation period is approaching — you need to protect your right to claim
• You need to defend a claim that has already been filed

A breach of contract lawyer can review the demand letter, assess your exposure, draft a response, and — if necessary — represent you if the matter proceeds to court.

What happens after you respond

If you reach a settlement

Put the agreement in writing. A settlement should clearly state what each party will do, the timeline, and a full and final release — meaning neither side can reopen the dispute later. A lawyer can draft a simple settlement agreement for a flat fee.

If negotiations stall

If you cannot reach agreement, the sender may file a claim. At that point, the process moves to court — typically Small Claims Court for disputes up to $50,000. You will need to file a Defence and may attend a settlement conference, where a judge will try to help both sides reach a resolution before trial.

If you have a counterclaim

Sometimes the best defence is a claim of your own. If the sender owes you money, damaged your property, or breached their obligations, you can file a Defendant's Claim. This is common in debt disputes and contractor disagreements where both parties believe the other is at fault.

Frequently asked questions

Do I have to respond to a demand letter in Ontario?

There is no legal obligation to respond. However, ignoring it is rarely a good strategy. If the sender files a claim, the court will see that you were given an opportunity to resolve the matter and chose not to engage. A measured response — even one that disputes the claim — is almost always better than silence.

How long do I have to respond to a demand letter?

Most demand letters set a deadline of 10 to 15 business days. This deadline is not legally binding — it is chosen by the sender. However, you should take it seriously. Responding within the stated deadline shows good faith and may help you negotiate a better outcome.

Can I negotiate the amount in a demand letter?

Yes. A demand letter is the opening position in a negotiation, not a court order. You can dispute the amount, propose a lower figure, offer a payment plan, or challenge the factual basis of the claim. Many disputes settle for less than the original demand.

Should I hire a lawyer to respond to a demand letter?

If the amount is significant, the facts are complex, or you are unsure of your legal position, a lawyer can help you craft a response that protects your interests. A lawyer can also identify weaknesses in the sender's claim that you may not have noticed.

What happens if I ignore a demand letter?

The sender will likely file a claim in Small Claims Court (for disputes up to $50,000) or Superior Court. You will then need to file a Defence within the court's deadline or risk a default judgment — a court order requiring you to pay without a hearing.

Take the demand letter seriously — but not personally

A demand letter is a business communication, not a personal attack. The sender wants something from you, and the letter is their attempt to get it without going to court. Your response is your opportunity to protect your interests, present your side, and — in many cases — resolve the dispute on terms that work for both sides.

Call 416-554-1639 or book a free consultation to discuss your demand letter with a Toronto business lawyer.