Key Takeaways:

  • Verbal agreements in Texas are legally binding if they meet essential contract formation elements.
  • The Statute of Frauds restricts some verbal contracts, requiring them to be in writing (e.g., real estate deals, contracts lasting over a year).
  • Proving an oral contract can be challenging, requiring witness testimony, emails, or other supporting evidence.
  • Partial performance can sometimes validate a verbal contract, demonstrating the parties' intent.
  • Verbal agreements for employment and service contracts are enforceable, though written contracts are preferable for clarity.
  • Remedies for breach of an oral contract include damages, and in some cases, specific performance.

Verbal contracts in Texas are legally binding and enforceable, provided they meet certain legal requirements like specificity and adequate consideration.

A consideration is said to be adequate if either:

  • It involves mutual exchange between the parties (after having bargained for it)
  • It has a legal value. In other words, the parties must agree to do something they are not otherwise legally required to.

However, not all oral agreements are binding under Texas law. For example, you cannot have oral executory contracts. Texas Property Code requires an executory contract to be made in writing and signed bу the party or its authorized representative.

Elements of a Valid Contract Under Texas Law

Under Texas law, a contract is formed when one party makes an offer, the other party accepts it, and there is consideration exchanged between them. While determining whether an oral contract exists, the courts in Texas look at the course of communication that took place between the parties as well as at the circumstances surrounding the communication.

Challenges in Proving a Verbal Agreement in Texas

Proving a verbal agreement in Texas can be challenging due to the absence of written documentation. Courts typically look at the following factors to determine enforceability:

  • Performance by one or both parties – If one party has partially or fully performed their obligations under the agreement, it serves as evidence that a contract existed.
  • Witness testimony – Statements from those who heard the agreement being made can support a claim.
  • Emails, texts, and correspondence – While a contract is verbal, supporting documents discussing the agreement may help establish its validity.
  • Behavior of the parties – If both parties acted as if a contract existed (e.g., payments made, services performed), the court may recognize the agreement.

To strengthen a verbal agreement, parties should maintain records of transactions, communication, and third-party interactions that reference the contract terms.

Statute of Frauds Limitations to Verbal Contracts

In order to avoid defrauding citizens, the Statute of Frauds also requires certain contracts to be made only in writing.

Texas Business and Commerce Code mandates that the following contracts must always be made in writing:

  • Making a trust or will
  • Guarantees, sureties, or contracts assuming responsibility for another’s obligations
  • Marriage, except for the one done in common law
  • Sale and other contracts involving land or real estate
  • Contracts lasting for a period of longer than one year from the time of agreement
  • Sale of goods where the price is greater than $500
  • Sale of securities
  • A promise made by an executor to settle the debt of his testator from his own estate
  • A promise to be answerable for the debt or default of another person
  • An agreement where marriage or conjugal соhаbitаtiоn is the consideration
  • Real estate lease for more than one year
  • An agreement to pay commission on sale or purchase of oil or gas royalty, oil or gas mining lease, or minerals
  • An agreement or warranty of cure made by a health care provider (including physicians but excluding pharmacists) pertaining to medical care or its effectiveness

For example, let's say that a contractor offers to paint your house for $5,000, and you agree to it. The job is expected to take somewhere between three and six weeks. If you pay the contractor on the basis of this verbal contract, you can enforce the contract in court since it has adequate consideration and can be performed within one year

Let's consider another case. A person buys 50 acres of land from his neighbor for a consideration of $40,000 but does not execute a written contract. Before the amount is paid, the neighbor pulls out of the agreement. This verbal contract cannot be enforced in law since it involves a real estate deal, oral contracts for which are specifically barred by the Statute of Frauds.

When a Verbal Agreement Is Enforceable Despite the Statute of Frauds

While the Statute of Frauds requires certain contracts to be in writing, Texas courts recognize some exceptions where an oral agreement can still be enforceable:

  1. Partial Performance: If one party has significantly acted on the contract (e.g., making payments, delivering goods), courts may enforce the agreement.
  2. Promissory Estoppel: If a party reasonably relies on a promise to their detriment, the court may prevent the other party from denying the existence of the agreement.
  3. Admissions in Court: If a defendant admits under oath that a contract existed, this may be enough to enforce it.
  4. Special Rules for Real Estate: Although real estate contracts must be written, an oral agreement might be upheld if significant steps have been taken, such as moving in or making improvements to the property.

These exceptions demonstrate that, while written contracts are always preferable, verbal contracts are not necessarily unenforceable in every situation.

Breach of Oral Contracts

A breach of oral contract takes place if all of the following conditions are met:

  • A valid contract exists between the parties.
  • The plaintiff (the suing party) has performed their obligations under the contractThe defendant fails to perform its obligation.
  • The plaintiff incurs damages due to the defendant's breach or failure.

A case decided by the Houston Court of Appeals in 2012 presents a good example of breach of oral contracts. In this case, the vice president of a family-run business orally promised an employee to pay a bonus for the previous year. On failure to do so, the employee sued for the breach of contract. The trial court awarded damages of $42,500 to the employee, and the Houston court of appeals affirmed this ruling.

Remedies for Breach of a Verbal Agreement in Texas

When a party breaches a verbal agreement in Texas, the non-breaching party may seek legal remedies, including:

  • Compensatory Damages – The injured party may recover financial losses incurred due to the breach.
  • Restitution – If one party provided services or money, they may be entitled to reimbursement.
  • Specific Performance – In rare cases, a court may order the breaching party to fulfill their obligations under the contract.
  • Quantum Meruit Claims – If no enforceable contract exists, a party may still recover fair compensation for services rendered under the principle of unjust enrichment.

If facing a breach of a verbal agreement, consulting an attorney can help determine the best course of action.

Enforcing Oral Contracts in Texas

In order to be valid, a contract must have the following essential elements:

  • An offer
  • Acceptance of the offer
  • A meeting of minds (i.e., both the parties must have understood the agreement in the same perspective)
  • Consideration (each party must receive something of value in exchange for something else)

Oral agreements often pose difficulty in proving the existence of these essential elements. Hence, the plaintiff is usually required to prove that the other party performed some duties under the oral contract. The parties need to support their claims with witness statements, related correspondence, invoices, and other supporting documents.

Best Practices for Protecting Verbal Agreements

Although verbal contracts may be legally binding in Texas, written agreements provide stronger legal protection. Consider these best practices to safeguard verbal agreements:

  • Follow up with written confirmation – Sending a text, email, or letter summarizing the agreement can help establish terms.
  • Keep transaction records – Retain payment receipts, invoices, or work logs that reference the verbal agreement.
  • Have witnesses – If possible, involve a third party who can attest to the agreement.
  • Record Conversations Where Legal – Texas is a one-party consent state, allowing one party to legally record a conversation without the other party’s knowledge, which can serve as evidence.

These steps can help prevent disputes and improve the enforceability of verbal agreements in court.

Frequently Asked Questions

1. Are verbal agreements enforceable in Texas?

Yes, verbal agreements are legally binding in Texas if they meet the basic contract elements. However, some agreements must be in writing under the Statute of Frauds.

2. What types of verbal contracts are not enforceable in Texas?

Contracts related to real estate, agreements lasting over one year, and contracts exceeding $500 in goods typically require a written agreement to be enforceable.

3. How can I prove a verbal contract in court?

You can provide witness testimony, emails, payment records, or proof of partial performance as evidence of a verbal contract.

4. What happens if someone breaches a verbal agreement?

If a verbal contract is breached, the non-breaching party can seek damages, restitution, or even specific performance in certain cases.

5. Should I rely on verbal contracts in Texas?

While verbal agreements can be legally binding, written contracts provide stronger legal protection and help avoid disputes. Whenever possible, it's best to document agreements in writing.

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