A demand letter is not a lawsuit, but how you respond can shape what happens next. Here is how to read a BC demand letter, the replies that can hurt you, how an acknowledgment can restart an old limitation clock, and your realistic options.
A letter arrives saying you owe money or have broken a contract, and that a claim will be filed if you do not pay by a certain date. It may come from a former customer, a contractor, a landlord or a lawyer. The natural reactions are to ignore it or to fire back an angry reply.
Both can make things worse. A demand letter is not a court claim, and you usually have time to think, but what you say and do in the next few days can affect whether you are sued and how strong your defence will be. Here is how to approach it.
First, understand what you have received
A demand letter is a request, not an order. It has no legal force on its own, and the deadline in it is set by the sender, not by a court. But it usually signals that the sender is prepared to start a claim, so it deserves a careful response.
Start by checking:
- Who sent it. Is it from the other party or from a lawyer? If it is on law firm letterhead, check that the firm and lawyer are real before acting on any payment instructions. Scam letters that copy real firms do circulate.
- What is claimed and why. Note the amount, how it was calculated, and the legal basis: an unpaid invoice, a loan, a breach of contract, damage to property.
- The deadline and the threatened next step. Mark the date. Missing a sender's deadline does not by itself create liability, but it may prompt a claim.
- Who it is addressed to. If it names your company, the claim may be against the company rather than you personally, or the reverse. That distinction matters.
Then gather your documents: the contract, invoices, emails, texts, photos and payment records. Keep everything, including material that does not help you. Destroying relevant records once a dispute is in view can seriously damage your position.
Replies that can hurt you
The biggest risk in responding to a demand letter is creating evidence against yourself.
- Admitting the debt in writing. Under section 24 of BC's Limitation Act, a signed written acknowledgment of liability, made to the claimant before the limitation period expires, restarts the limitation clock from the date of the acknowledgment. For a claim for a fixed sum, a part payment has the same effect. If the claim is old, a casual email saying you know you owe the money, or a small payment to buy time, can give the other side a fresh two-year window.
- Detailed explanations of what went wrong. Long emails conceding mistakes, delays or poor workmanship may later be used as admissions.
- Angry or threatening replies. These rarely help and can be read by a judge later.
- Ignoring it completely. Silence does not make the claim go away, and it removes your chance to resolve it early or correct the sender's facts. If the sender later gets a judgment, they have real tools to collect it.
An apology is treated differently. BC's Apology Act says an apology, meaning an expression of sympathy, regret or contrition, is not an admission of fault or liability and is not an acknowledgment under section 24 of the Limitation Act. Saying you are sorry for the situation is not the same as confirming you owe the amount claimed, so keep any apology separate from statements about the facts or the money.
Check whether the claim is out of time
Under section 6 of the Limitation Act, most claims must be started in court within two years after the claim is discovered, as defined in section 8. If the events in the letter happened several years ago, the sender may already be out of time. That is a strong defence, and it is exactly why you should not acknowledge an old debt without advice first. Our post on BC's two-year limitation period explains how discovery and the deadlines work.
You may also have claims of your own, such as unpaid amounts owed to you or defective goods you received. If the sender sues within time, section 22 of the Limitation Act allows a counterclaim or set-off relating to that claim even if your own limitation period has expired, subject to the limits in that section.
Your realistic options
Once you understand the claim, you generally have four choices:
- Pay. If the claim is valid and the amount is correct, paying may be the cheapest outcome. Get a written release or confirmation that the matter is resolved in full.
- Negotiate. If you owe something but not everything, a settlement proposal is often worthwhile. Settlement offers are usually made on a without-prejudice basis, so the discussions cannot normally be used as evidence that you admitted the claim. Get advice on how to frame the offer so it is clearly protected.
- Dispute it. If the claim is wrong, a short, factual reply that disputes the claim, corrects key facts and asks for supporting documents can end it or narrow it.
- Wait and prepare. In some cases the right response is a brief acknowledgment of receipt, or no response, while you prepare to defend a claim if one is filed. This should be a deliberate choice, not avoidance.
If a claim is filed, the court or tribunal documents will have strict response deadlines. Missing them can lead to a default judgment, so read our overview of where BC disputes are heard and act promptly.
Businesses: check your insurance and contracts
If the letter alleges property damage, injury, professional error or a defect in your work, check your insurance policies. Many policies require prompt notice of a claim, and late notice can put coverage at risk. Also review the contract for dispute resolution, limitation of liability, or notice clauses that may change your response.
When to get advice
A short consultation before you reply is worthwhile when the amount is significant, a lawyer sent the letter, the claim is old, you have a counterclaim, or the letter alleges fraud or personal liability. A lawyer can assess the claim, check limitation issues, and draft a response that protects your position, whether that is a dispute, a settlement offer or a plan to defend.
Got a demand letter? Talk to us before you reply
Our litigation lawyers can review the letter and your documents, check limitation and liability issues, prepare a response or settlement proposal, and defend a claim if one is filed.
Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.
Sources
General information about British Columbia law as at the date shown, not legal advice. Reading this article does not create a lawyer-client relationship. Please speak with a lawyer about your own circumstances.