When Does Texas Law Require that a Contract Be in Writing?
In business, the terms of many agreements are hammered out over the phone or at a meeting. An important question to address, though, is the extent to which verbal promises are enforceable. Must a contract be in writing to be enforceable? Are there specific situations where you must put the terms of your agreement in writing? If so, what are the circumstances where that’s necessary?
The Statute of Frauds
As a general rule, oral contracts are valid and enforceable. If there’s a dispute, you may find it difficult to establish the terms of the agreement, but if you have witnesses or other evidence to support the existence of an agreement, a court will often enforce it, with specific exceptions. Those exceptions are set forth in the statute of frauds.
The statute of frauds evolved out of concerns that the terms of certain types of agreements will be difficult to discern if not written down. In Texas, the following types of agreements must be in writing:
- Contracts for the sale of real estate or real property
- Contracts involving commissions from the sale of certain oil, gas or mineral rights
- Loan agreements where the principal amount exceeds $50,000
- Contracts where the terms do not allow performance to be completed within one year of the date of execution of the agreement
- Agreements to pay off the debts of another person
- Contracts for marriage or co-habitation
- Leases with a term of more than one year
- Certain medical care agreements
- A contract for the sale of goods in excess of $500
It’s also important to understand that, even though a contract may be governed by the statute of frauds, and generally not enforceable unless in writing, the courts typically have the power to avoid the application of the statute of frauds if doing so would result in a fraud. If a party to a contract reasonably relied on a verbal promise and would suffer a loss if the promise is not enforced, the court may use the principal of “equity” to enforce the promise.
At MCIS Law, PLLC, in Stafford, we aggressively advocate for businesses and individuals in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.