Responding to Unpaid Invoice Demand Letters | Business Payment Defense Strategy

✍️ Need to Send an Unpaid Invoice Demand Letter? If someone owes you money, see my guide on How to Write Unpaid Invoice Demand Letters →

📋 First 48-72 Hours: Critical Triage Checklist

When you receive a demand letter for unpaid invoices, your first response in the next 48-72 hours will shape your entire defense strategy. Don't panic—follow this structured checklist to assess the claim objectively and preserve your legal rights.

⏱️ Immediate Actions (First 24 Hours)

Read the demand carefully: Note the claimant's name, the amount demanded, the deadline for payment, and the stated basis for the claim. Identify any specific contract sections cited.
Do not admit liability: Do not respond via email, phone, or in writing acknowledging the debt or apologizing. Any admission will be used against you in settlement negotiations and litigation.
Implement litigation hold: Immediately notify your team to preserve all documents—emails, Slack messages, project files, invoices, and internal notes—related to this vendor and engagement. Failing to preserve evidence can result in serious sanctions.
Consult with counsel: Contact an attorney before responding. Early legal consultation can save you thousands in avoidable mistakes and protect attorney-client privilege.

Verification Checklist: Do You Actually Owe This?

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Verify the Invoices Pull your accounting records, bank statements, and payment processing logs. Cross-reference each invoice listed in the demand against what you've actually received and reviewed. Do the invoice numbers, dates, and amounts match your records?

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Check Payment Status Have you already paid some or all of these invoices? Search your bank records, credit card statements, ACH transfer logs, and accounting software. Document every payment made—date, amount, and method. Partial payments are critical evidence.

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Review Services Rendered What exactly did the vendor claim to provide? How was it delivered? Was it complete? Were there any quality issues, missed deadlines, incomplete deliverables, or failures to meet specifications? Document everything—even minor issues strengthen your negotiating position.

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Examine the Contract Locate any signed agreement, statement of work, purchase order, or email exchange that formed the contract. Key items: payment terms, quality standards, acceptance procedures, liability caps, arbitration clauses, and attorney's fees provisions.

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Assess Offsets and Counterclaims Did you incur costs to fix the vendor's defective work? Did the vendor's delays cause you lost revenue or require rework? Do you have third-party invoices for replacement services? These are valuable offsets that reduce what you owe.

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Examine Dispute Record Did you raise quality concerns or objections when you received the deliverables? Are there internal notes or emails documenting defects? A documented dispute timeline is critical evidence and shows the vendor knew of problems.

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Check Insurance Coverage Review your general liability, E&O, and professional services insurance policies. Some policies cover contractual disputes or indemnify you for defense costs. Notify your insurer immediately if coverage applies—late notice can forfeit coverage rights.

Documentation Deep Dive: Organize Your Evidence

📁 Create a Demand Letter Response File

Organize all relevant documents in one location (digital folder or physical file):

Contracts & Agreements: Master service agreement, SOW, purchase orders, email confirmations—anything that establishes the engagement and its terms.
Invoices: All invoices from the vendor, including dates, amounts, and whether each is paid, partially paid, or unpaid.
Payment Records: Bank statements, canceled checks, ACH confirmations, credit card statements—proof of what you've paid and when.
Communications: Email threads, Slack messages, meeting notes—especially any discussion of quality issues, deliverables, or payment disputes.
Deliverables & Proof of Performance: The actual work product, screenshots showing deployment, client sign-offs, acceptance emails, or evidence of use.
Quality Concerns & Complaints: Internal QA reports, bug logs, client complaints, your own team's notes about defects or deficiencies.
Offset Evidence: Invoices for replacement services, costs to fix defects, time tracking for rework, documentation of lost revenue.

⚠️ Critical Mistakes to Avoid in First 72 Hours

Ignoring the letter: Silence will result in litigation, liens, collection actions, and judgment. A bad response beats no response.
Admitting liability: Don't say "we owe you" or apologize. Even partial admissions will be used against you.
Making partial payment without agreement: Paying part of the invoice can trigger "account stated" claims, where courts treat partial payment as acknowledgment of the full debt.
Emotional or hostile responses: Keep communication professional and business-focused, even if you believe the claim is frivolous.
Deleting emails or messages: Once litigation is threatened, document preservation becomes mandatory. Deletion is spoliation and can result in severe sanctions.
Failing to consult counsel: Early attorney consultation is cheaper than fixing later mistakes.

💡 Triage Outcome: Three Paths Forward

After 48-72 hours of analysis, you'll fall into one of three categories:

You clearly owe it: Negotiate the best terms possible and settle. Look for payment plans, interest forgiveness, or fee waivers.
You owe some, not all: Prepare a partial payment + negotiation response. Identify your offsets and counterclaims.
You have legitimate defenses: Document your defenses and develop a comprehensive response strategy with counsel.

⚖️ Response Strategy Framework

Once you've triaged the claim, you need a response strategy. Your approach depends on the strength of your position and the cost-benefit analysis of settlement versus litigation.

Strategic Response Options

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Full Payment (You Owe It) If the invoice is legitimate and you have no defenses, paying promptly stops the meter on interest, avoids litigation costs, and prevents attorney's fees exposure. Negotiate removal or reduction of late fees and interest if possible.

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Partial Payment + Negotiation If you owe some but not all, or if you have legitimate offsets, propose paying a reduced amount. Structure this as: "I will pay $[amount] in full and final settlement, with both parties executing a mutual release."

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Quality Defense If the vendor's work was defective, incomplete, or failed to meet specifications, document the deficiencies in detail. Propose: re-performance by the vendor, price reduction proportional to defects, or your cost to fix the work.

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Statute of Frauds Defense If there is no signed contract and the amount exceeds $500 (or your state's threshold for goods) or $2,000 (for services in some states), you may have a statute of frauds defense. This is a complex legal argument—consult counsel before asserting.

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Prior Breach by Vendor If the vendor breached first (missed deadlines, failed to meet specs, or failed to perform under other contracts), this may excuse your payment obligation under the doctrine of material breach. Document this thoroughly.

Drafting Your Response: Key Strategic Decisions

📝 Should You Respond in Writing?

Yes. A professional written response:

Demonstrates that you're taking the matter seriously
Preserves attorney-client privilege if counsel reviews it
Creates a record of your position if litigation follows
Signals willingness to negotiate, which often leads to settlement
Protects you from default judgment if sued

What NOT to include: Admissions of liability, emotional language, accusations, threats, or unnecessary details beyond your core position.

Response Strategy for Different Situations

Scenario 1: Clear Quality Issues

If the vendor's deliverables were defective or incomplete:

Quantify the deficiencies: "The code did not meet the technical specifications outlined in Section 3 of the SOW. Specifically, [describe defects]."
Calculate your cost to cure: "We incurred $X to fix these deficiencies" (attach invoices for replacement services).
Propose resolution: "I am willing to pay $[reduced amount] to account for the cost to cure and the defective nature of the work."
Offer mutual release: "Upon payment, both parties will execute a mutual release of all claims."

Scenario 2: Services Not Completed or Accepted

If the vendor's work was never accepted or completed:

Document the lack of acceptance: "We never formally accepted these deliverables. You never requested acceptance, and we raised concerns in [cite emails] that were never addressed."
Invoke the contract's acceptance clause: "Under Section [X] of the contract, delivery and acceptance are separate requirements. Delivery alone does not trigger payment."
Propose remedy: "We will accept these deliverables upon [specific revisions/fixes]. Once completed to specification, we will pay."

Scenario 3: Payment Already Made

If you've already paid some or all of the invoice:

Provide evidence: "Our bank records show payment of $[amount] via [method] on [date]. Please see attached bank statement and ACH confirmation."
Note the discrepancy: "Your demand does not account for this payment, suggesting either a recordkeeping error on your end or a duplicate claim."
Propose reconciliation: "Please provide your payment ledger so we can reconcile any discrepancies and resolve this promptly."

Scenario 4: No Written Contract

If there is no signed agreement between you and the vendor:

Note the lack of contract: "I am not aware of a signed contract establishing the scope, price, and payment terms for this engagement."
Challenge the enforceability: "Without a written agreement, [applicable statute of frauds] may limit your ability to enforce payment claims for amounts exceeding $[threshold]."
Request documentation: "Please provide a copy of any written agreement you believe we executed, or provide your documentation of the price and scope agreed to."
Caveat: This is a complex legal defense. Consult counsel before asserting statute of frauds claims.

⚠️ What NOT to Do in Your Response

Admit liability unnecessarily: Don't write "we owe you" just because you're disputing the amount. Admit only what you clearly owe.
Make threats or accusations: Don't accuse the vendor of fraud, bad faith, or improper conduct unless you have strong documentation.
Ignore the deadline: Respond before the deadline in the demand letter, even if only to request more time.
Provide unnecessary detail: Stick to your core defenses. Don't volunteer additional information that could hurt your position.
Promise to investigate and respond later: Make a substantive response, not a placeholder.

🛡️ Legal Defenses and Offset Claims

Beyond simply disputing the amount, you may have legitimate legal defenses that reduce or eliminate your payment obligation. Understanding these defenses helps you evaluate your true liability and negotiating position.

Common Defenses to Unpaid Invoice Claims

1. Defective Services or Non-Performance

The Principle: A party cannot recover payment for services that fail to meet the contract's specifications or quality standards.

What you need:

Written specifications from the contract or SOW
Evidence that deliverables don't meet those specifications (screenshots, test results, QA reports, internal emails)
Documentation that you raised concerns timely (email threads showing when you identified defects)
Calculation of your cost to fix or replace the defective work

Strength: Very strong if the defects are significant, documented, and timely raised. Weak if only minor issues or if the vendor claims the work was "good enough."

2. No Written Contract / Statute of Frauds

The Principle: Certain contracts must be in writing to be enforceable. If there's no signed agreement and the amount is substantial, you may have a defense.

Key thresholds:

Goods over $500 (UCC § 2-201)
Services over $2,000 (in some states; varies widely)
No email confirmations or other written evidence of price and scope

Strength: Highly dependent on state law and the nature of the engagement. Email trails can sometimes substitute for a formal contract. This is a complex legal argument—consult an attorney before relying on it.

3. Prior Material Breach by Vendor

The Principle: If the vendor breached the contract first (missed deadlines, failed to meet specs, or breached other obligations), you may be excused from paying.

What you need:

Contract language establishing the vendor's obligations
Evidence that the vendor breached (emails showing missed deadlines, project tracking logs showing incomplete work, your contemporaneous complaints)
Evidence that you relied on the vendor's breach (you couldn't proceed, incurred delays, or paid for replacement services)

Strength: Strong if the vendor's breach was material (significant and went to the heart of the contract). Weak if the breach was minor or remedied by the time you withheld payment.

4. Statute of Limitations

The Principle: Contract claims must generally be brought within a certain time period (3-6 years in most states).

Key factors:

When did you receive the invoices? When did the vendor first demand payment?
Has more than the applicable limitations period passed since the services were performed or invoices issued?
Partial payments can "restart the clock" on the statute of limitations for the remainder of the debt in some states.

Strength: Only applicable if the demand is brought years after the services. Most B2B disputes are filed well within the limitations period.

5. Disputed Invoices vs. Account Stated

The Principle: If you've disputed an invoice timely and documented your objections, the vendor cannot later rely on "account stated" (the claim that partial payment or silence constitutes acceptance).

What you need:

Written evidence that you disputed the invoice (email objecting to the amount, quality, or scope)
The dispute must be raised before you make payment (if you pay first, dispute second, account stated may still apply)
Documentation showing the dispute remained unresolved when payment was due

Strength: Strong if you have clear, timely written objections. Weak if you were silent and then paid part of the invoice.

Offset and Counterclaim Opportunities

Cost to Cure / Replacement Services

If the vendor's work was defective, what did it cost to fix or replace?

Invoices from replacement vendors or contractors who fixed the vendor's work
Your internal labor costs (if you have time tracking, multiply hours × hourly rate)
Third-party testing or QA costs to identify and document defects

Offset amount: You can offset this against what you owe the vendor, dollar-for-dollar.

Lost Revenue from Vendor's Delays

If the vendor's delays prevented you from completing your own work or deploying to market, did you suffer lost revenue?

Project delay timeline (contract deadline vs. actual delivery date)
Evidence of lost contracts or revenue (customer emails, project logs, financial records)
Documentation of alternative costs (expedited shipping, overtime labor, rush fees for replacement work)

Offset amount: Calculate a reasonable amount based on documented delays and damages.

Client Complaints and Reputational Harm

Did the vendor's defective work damage your relationship with your own clients?

Client complaint emails or support tickets related to the vendor's work
Evidence that you had to apologize or offer refunds to your clients
Documentation of remediation costs (support time, refunds issued, replacement work)

Offset amount: Refunds you issued to your clients; support time spent addressing the defect. Avoid claiming pure reputational harm (courts are skeptical of vague claims).

⚠️ Offset and Counterclaim Strategy

Document everything: Offsets must be quantifiable and supported by evidence (invoices, time records, customer communications).
Don't overstate: Claim only what you can prove. Inflated offset claims undermine your credibility.
Distinguish between offset and counterclaim: An offset reduces what you owe; a counterclaim is a separate claim for damages beyond the offset.
Raise both in your response: Don't wait until litigation to assert offsets. Mention them in your initial demand letter response to increase negotiation leverage.

💰 Settlement Options and When to Fight vs. Settle

Most unpaid invoice disputes settle without litigation. Understanding settlement dynamics and your true cost of litigation helps you make strategic decisions about when to settle and for how much.

Settlement vs. Litigation: Cost-Benefit Analysis

⏱️ Timeline Comparison

Settlement negotiation: 30-90 days from demand letter to resolution
Mediation: 60-120 days, often yields 60-75% recovery
Arbitration: 6-12 months from filing to award (faster than court, but expensive)
Litigation: 12-36 months from filing to judgment, then potentially years for collection

💸 Cost Comparison (Estimating Your Exposure)

What will litigation cost you? Be honest:

Attorney's fees: $200-$350/hour, average 50-100 hours for a $25K claim = $10K-$35K in legal fees alone
Management time: Your time spent responding to attorneys, gathering documents, depositions. Often equals or exceeds legal fees in opportunity cost
Discovery costs: Document production, expert witnesses, depositions
Trial/hearing: If it reaches trial or arbitration hearing, costs accelerate dramatically
Judgment collection: If you win, you still have to collect. A judgment is worthless if the vendor is judgment-proof
Reputational risk: Business disputes can damage vendor relationships and your reputation

Rule of thumb: If the claim is under $50K and the vendor doesn't have clear assets, litigation often costs more than settlement.

Settlement Scenarios and Target Ranges

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You Have Strong Defenses (Payment Range: 0-30%) If you have documented quality defects, prior breach by vendor, or solid legal defenses, you're in a strong position. Offer 20-30% of the claim in settlement (or propose mutual release with no payment). The vendor likely won't pursue litigation if they know they'll lose.

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Legitimate Offsets (Payment Range: 30-60%) If you have documented offsets (cost to cure, lost revenue, client complaints) that reduce your liability, offer to pay the net amount after offsets. This is often the most reasonable settlement position.

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You Owe Most of It, But Want Better Terms (Payment Range: 80-100%) If the vendor's claim is solid but you'd prefer flexibility, offer 100% payment with favorable terms: payment plan, interest waiver, late fee forgiveness. A payment plan is often preferable to lump-sum settlement for both parties.

Settlement Structure: Key Terms to Negotiate

1. Payment Amount

Start with an aggressive counter-offer and work toward the vendor's number. Examples:

Vendor demands $100K. You offer $30K. Settlement point: $55-65K, depending on leverage.
Vendor demands $50K with $5K in accrued interest. Offer $45K (no interest). Settlement: $48K.

2. Payment Terms

If full payment isn't feasible immediately, propose a payment plan:

3-month plan: $X per month for 3 months (often acceptable if first payment is within 10-14 days)
6-month plan: Stretched payments (more time for you to arrange cash flow)
Contingent payment: Payment upon receipt of specific deliverables or milestones if work is ongoing

3. Mutual Release

Critical: Require that once you pay, the vendor releases ALL claims against you, including:

The disputed invoices
Interest, late fees, and penalties
Any counterclaims or cross-claims
Rights to pursue further collection action

Language: "Upon receipt of payment, Vendor will execute a General Release in the form [attach] releasing all claims arising from the Engagement."

4. Confidentiality

Consider whether you want the settlement amount kept confidential:

Pro: Vendor can't use the settlement as precedent for future claims or tell other vendors what you'll pay
Con: Confidentiality agreements add complexity and give vendor "bragging rights" to others

5. No Admission of Liability

Standard language: "This settlement is made for settlement purposes only and does not constitute an admission of liability by either party."

Why it matters: Protects you from the settlement being used as evidence of fault in other disputes or with your own customers.

💡 Settlement Negotiation Tips

Counter early: Respond with a counter-offer within 10-14 days. Long silence suggests you're weakening your position.
Use third parties: Having your attorney make offers feels more formal and serious than you making them directly.
Show calculation: When you offer a reduced amount, explain it: "Offset by $X for cost to cure = net obligation of $Y."
Offer a deadline: "This offer expires on [DATE]. If you don't accept by then, we'll assume litigation is necessary and shift to that approach."
Be reasonable: Offering 40% of a $100K claim (when you might owe 60%) is a good starting point. Offering 5% signals bad faith.
Document all offers: Send all settlement proposals in writing (email or letter) so there's a clear record.

When to Walk Away: Litigation Threshold

Sometimes settlement isn't the right answer. Consider litigation if:

You have a clear win: Strong defenses, documented quality defects, or prior vendor breach. Litigation risk is low.
Vendor is judgment-proof: You're paying to make the demand go away (settlement for nuisance value), not because you owe money.
Principle is at stake: The vendor is threatening other customers with similar false claims, and a judgment will deter future claims.
You have insurance: E&O or general liability coverage covers defense costs, reducing your out-of-pocket exposure.
Attorney thinks you'll win: If a strong attorney tells you the vendor's claim is weak and you're likely to prevail, litigation may be worth it.

✍️ Response Letter Templates and Snippets

Use these templates as starting points for your response. Customize with your specific facts, contract references, and supporting documentation. Always have an attorney review your response before sending.

Opening: Acknowledging Receipt and Disputing Liability

I am in receipt of your demand letter dated [DATE], in which you claim I owe $[AMOUNT] for unpaid invoices related to [BRIEF DESCRIPTION OF ENGAGEMENT]. I dispute the amounts claimed and the underlying liability for the following reasons: 1. [PRIMARY DEFENSE: e.g., "The deliverables provided did not meet the specifications outlined in our agreement. Specifically, [describe deficiencies in detail]."] 2. [SECONDARY DEFENSE: e.g., "Your breach of [specific contractual obligation] constitutes a material breach that excuses my performance."] 3. [OFFSET/COUNTERCLAIM: e.g., "I incurred $[AMOUNT] in costs to remediate the deficiencies in your work, which I am entitled to offset against any amount owed."] This letter constitutes my response to your demand and preserves all of my rights under law.

Quality Defense Response

The deliverables your demand references were defective and did not comply with the contractual specifications. Our contract required that [quote relevant specifications from SOW/agreement]. Your work failed to meet these standards in the following respects: - [Specific defect #1: describe in detail, reference supporting evidence] - [Specific defect #2: describe in detail, reference supporting evidence] - [Specific defect #3: describe in detail, reference supporting evidence] We raised these concerns in emails dated [EMAIL DATES]. Your response was insufficient/non-responsive/did not resolve the deficiencies. As a result of these defects, we incurred the following costs: - Third-party correction services: $[AMOUNT] (see attached invoices) - Internal rework and labor: $[AMOUNT] (see attached time records) - Client complaints and remediation: $[AMOUNT] Total offset: $[AMOUNT] The net amount owed to you, if any, is $[AMOUNT DEMANDED] minus $[OFFSET] = $[NET AMOUNT]. I am prepared to discuss resolution of this matter on that basis.

Payment Already Made Response

I dispute the claim on the basis that the invoices referenced in your demand have already been paid. Specifically: Invoice No. [####] – Amount [AMOUNT] – Payment made [DATE] via [wire transfer/ACH/check] – Confirmation [reference bank document/check image] Invoice No. [####] – Amount [AMOUNT] – Payment made [DATE] via [wire transfer/ACH/check] – Confirmation [reference bank document/check image] Total paid: $[TOTAL PAID] Please see attached bank statements and payment confirmations. I request that you reconcile your records with mine. If you claim additional invoices not reflected in my payment records, please provide detailed documentation of those invoices, their dates, and the amounts you claim remain unpaid. I am prepared to discuss any discrepancies and reach prompt resolution once we've clarified what has and hasn't been paid.

Partial Payment Offer (Golden Bridge)

While I dispute portions of your claim, I recognize that [AMOUNT] is legitimately owed for services rendered. I propose the following resolution to avoid further dispute and litigation: I will pay $[PROPOSED AMOUNT] in full and final settlement of all claims arising from this engagement. Payment Terms: - Option 1: Full payment within [10-14] days of your written acceptance - Option 2: Payment plan of $[X] per month for [3-6] months, with first payment due within [10] days Upon receipt of payment, you will provide a written release in the form attached, releasing all claims arising from the engagement, including the unpaid invoices, interest, late fees, and any counterclaims. This offer is made for settlement purposes only and does not constitute an admission of liability for the full amount you claimed. If you do not accept this proposal by [DATE], I will assume litigation is necessary and take appropriate steps to defend my interests. I prefer to resolve this matter promptly and professionally. Please confirm your acceptance of this proposal within [5] business days. [Your signature block] Attachments: Proposed Mutual Release Agreement

No Written Contract Defense

I dispute your claim on the basis that there is no written contract establishing the scope, specifications, price, and payment terms for the services you claim I should have paid for. Your demand references [general description: "software development services," "consulting work," etc.], but you have not attached or referenced any signed agreement, Statement of Work, Purchase Order, or written confirmation of: - The specific services to be provided - The price for those services - The payment terms Under the Statute of Frauds, contracts for [services of this type / amounts exceeding $X] are unenforceable unless evidenced by a writing signed by both parties. Please provide: 1. A copy of any written agreement you believe we executed 2. Documentation showing the agreed-upon price, scope, and payment terms 3. Evidence that I accepted and agreed to those terms Until you provide this documentation, I cannot verify the legitimacy of your claim or the amount you allege is owed.

Prior Breach by Vendor Defense

Your claim is barred, in whole or in part, by your own breach of our contract. Under the doctrine of material breach, a party cannot recover payment if that party breached a material obligation under the same contract. Specifically, your material breaches include: 1. [Breach #1: e.g., "Failure to deliver within the contracted timeline. Per Section X of our agreement, delivery was due on [DATE]. You did not deliver until [DATE], causing us [describe impact: missed deadline with our own customer, forced us to seek alternative services, caused lost revenue of $X]"] 2. [Breach #2: e.g., "Failure to meet performance specifications. Section X required [specific technical standard]. Your deliverable failed to meet this standard, as documented in [reference testing/QA records]"] 3. [Breach #3: similar format] Because you materially breached the contract, you cannot recover payment for invoices issued under that same contract. Your breach excuses my obligation to pay. I am willing to discuss resolution, but only on the understanding that these material breaches must be accounted for in any settlement.

Requesting Documentation and More Time

I received your demand letter dated [DATE] and am taking it seriously. However, before I can respond substantively, I need to gather documentation from my records to verify your claims and understand your position fully. Specifically, I need: - A complete breakdown of each invoice claimed to be unpaid, with invoice numbers, dates, descriptions, and amounts - Proof of when each invoice was issued to me and how I was notified - Copies of our written agreement, if any, establishing the scope, price, and payment terms - Your documentation of the services you claim to have provided and when they were delivered - Any communications from me (emails, Slack messages, etc.) that you believe constitute acceptance of the services I have [AMOUNT OF TIME REQUESTED: "14 days" or "21 days"] from the date of this letter to provide a comprehensive response. I am committed to resolving this matter professionally and promptly, but I need accurate information to do so. Please send the requested documentation to [your contact information] by [DATE].

Closing: Expressing Willingness to Resolve

While I dispute the liability and amount claimed in your demand letter, I am committed to resolving this matter without litigation if we can reach a reasonable agreement. I propose that we [choose one or more]: - Exchange detailed documentation so we can identify any facts we agree on and those we dispute - Participate in a meet-and-confer discussion, either directly or through counsel, to discuss resolution options - Submit this matter to mediation if good-faith negotiation does not yield resolution I will contact you by [DATE] to discuss a path forward. In the meantime, please treat this letter as my response to your demand and understand that I am not conceding any liability by making this response. If you have questions or would like to discuss this matter before [DATE], please contact me immediately. Sincerely, [Your name] [Your title] [Contact information] cc: [Your attorney, if applicable] Attachments: [List any supporting documents]

⚖️ How I Help Businesses Respond to Payment Demands

I represent businesses receiving unpaid invoice demands, helping you evaluate your actual liability, develop defense strategies, and negotiate favorable settlements—or defend vigorously if litigation becomes necessary.

Initial Assessment: Is This Claim Real?

First step: I review the demand letter, your contract with the vendor, your records (invoices received, payments made, deliverables), and your documentation of any quality issues or disputes.

What I deliver:

A candid assessment of your liability (do you actually owe this money?)
Evaluation of defenses and offsets you may have
Estimated litigation risk if the matter escalates
Realistic settlement range (what should you pay to resolve this?)
Timeline for different resolution paths (settlement, mediation, litigation)

Defense Response Drafting

I draft a professional response to the demand that:

Protects your legal interests without making unnecessary admissions
Articulates your defenses and offsets clearly
Signals that you're taking the claim seriously and willing to negotiate
Preserves your litigation options if settlement negotiations fail
Requests additional documentation from the vendor to support their claim

Result: A professional, strategic response that increases your negotiating leverage and creates a strong record if litigation follows.

Settlement Negotiation and Structuring

Once we've assessed your position, I handle negotiation with the vendor or their counsel:

Making and countering settlement offers based on your true liability and risk tolerance
Structuring payment plans if you can't pay lump-sum
Negotiating mutual releases, confidentiality terms, and liability waivers
Documenting the settlement in a binding agreement

Goal: Achieve maximum reduction of your exposure, often 30-50% off the claimed amount when legitimate defenses or offsets exist.

Litigation Defense (If Settlement Fails)

If the vendor sues or files arbitration:

Drafting your answer or response to the complaint
Asserting defenses and counterclaims (quality defects, offsets, prior breach)
Discovery (exchanging documents and information with the vendor's counsel)
Motion practice (fighting preliminary motions or seeking summary judgment)
Representing you in settlement conferences, mediation, or at trial/hearing

Fee Structures

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Demand letter: Flat fee $450

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Extended Negotiation and Settlement Hourly billing for settlement negotiation, counter-offer drafting, and settlement agreement preparation. Typically 10-25 hours, depending on the vendor's responsiveness and the complexity of structuring the deal.

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Litigation Defense Hourly billing for litigation representation (drafting pleadings, discovery, motion practice, depositions, trial). For complex cases, we may discuss retainer arrangements or caps on exposure.

⚠️ Why Early Consultation Saves Money

A $1,500 initial consultation often leads to a $10K-$20K settlement reduction vs. paying without evaluation
Early identification of defenses and offsets strengthens your negotiating position exponentially
A well-drafted response can deter further vendor action and lead to quick settlement
Late consultation (after you've made admissions or missed deadlines) is much more expensive

Schedule a Demand Letter Defense Strategy Call

If you've received a demand letter for unpaid invoices, I can help you understand your real liability, evaluate your defenses, and develop a cost-effective response strategy.

Use the Calendly link below to schedule a strategy call, or email me directly at owner@terms.law.

Schedule Strategy Call

Frequently Asked Questions

An initial consultation and response strategy typically costs $1,500-$3,000. This includes reviewing your contract, analyzing the vendor's claim, evaluating your defenses and offsets, assessing litigation risk, and providing a written recommendation on next steps. Many clients recover 2-3x this amount through better negotiation based on that initial assessment.

The deadline is set by the demand letter itself, typically 10-30 days. However, you don't need a final answer by that date. Responding with "We are evaluating your claim and will provide a detailed response by [DATE + 10-14 days]" is perfectly acceptable and buys you time to gather documents and consult with counsel. Missing the deadline entirely is a serious mistake and will trigger litigation.

Quality defects are a complete defense to payment. If the vendor's work failed to meet contractual specifications, you're not obligated to pay in full—and may not be obligated to pay at all. What matters is: (1) did the work fail to meet the contract's specifications? (2) can you document this failure? (3) did you raise the defect timely? If yes to all three, you have strong leverage to settle for a reduced amount or no payment plus offset for your cost to fix.

No. Ignoring a demand letter is a serious mistake. The vendor will likely sue or pursue collection action, and your non-response will be used against you as evidence that the claim is valid or that you were avoiding service. A professional response—even if it disputes the claim—signals that you're engaged and willing to resolve the matter, which often leads to settlement. Litigation is exponentially more expensive than negotiated settlement.

Don't accuse the vendor of fraud in your response letter unless you have strong documentation. Fraud claims are serious and if you're wrong, they can backfire. Instead, focus on documenting factual defenses: "The services did not meet specifications," "We've already paid this invoice," "Your prior breach excuses payment." Let the facts speak for themselves. Your attorney can help you determine whether any statements in the demand are provably false and warrant confrontation.

Not if you structure the settlement properly. Standard language in settlement agreements states: "This settlement is made for settlement purposes only and does not constitute an admission of liability by either party." This means you can offer to pay $25K to settle a $100K claim without admitting you owe anything. However, this protection only works if both parties agree to it. Don't make settlement offers in a way that sounds like admissions—always include the "no admission" language.

Yes. In fact, most cases that go to court settle before trial. Once litigation has begun, both sides' exposure is higher (litigation costs are running), so settlement leverage often increases. You can settle at any point—during negotiation before filing, after the lawsuit is filed, during discovery, or even after trial begins. The earlier you settle, the cheaper it is.