Verbal Contracts in Texas: Everything You Need to Know
Verbal contracts in Texas are legally binding and enforceable, provided they meet certain legal requirements like specificity and adequate consideration.3 min read
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 an offer involving consideration is made by one party and accepted by the other. 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.
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
- Guarantee, surety, or any other contract to take up the duty of another
- 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 the court of law since it is has adequate consideration, and it can be performed within a period of 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.
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 or the suing party performs its obligation under the contract.
- The 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.
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.
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