Are Oral Business Contracts Enforceable in Texas?

When Must a Commercial Agreement Be in Writing?

In business, many ventures and transactions are initially sealed verbally or with a handshake. Are there commercial agreements that must be in writing?

For centuries, oral agreements have been valid and enforceable in many contexts. Each state has a “statute of frauds,” which sets forth the types of contracts that must be in writing in order to be enforceable. In most places, these ag reements require a written document:

• Contracts involving any type of interest in land, including sales, leases, easements, and restrictive covenants;
• Contracts made in consideration of marriage; and
• Suretyship or guaranty agreements, where one party agrees to be responsible for the obligations of another.

When a Contract Must Be in Writing Under the Uniform Commercial Code

The Uniform Commercial Code (UCC) has been adopted throughout the United States to determine the legal rights and responsibilities of businesses and business owners. Drafted in 1952, Article 2 of the UCC governs the formation and enforcement of business contracts. Under the UCC, certain business agreements are not enforceable unless they are in writing:

• Any contract for the sale of goods where the agreed-upon price of the goods exceeds $500 must be signed “by the party against whom enforcement is sought.” Accordingly, an agreement signed by only one party can still be enforced against that party. The writing need not take a specific form but must contain the basic elements of a contract—a promise supported by consideration.
• A contract for the lease of business property or equipment that involves payments totaling more than $1,000 over the term of the lease must be in writing.
• Any agreement that creates a security interest—collateral for a loan, for example—is enforceable only if it is in writing.

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to startup and existing businesses in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We are currently communicating with clients by phone, text message, or videoconference. We accept all major credit cards.