Home

Team

About

Practice Areas

Testimonials

Insights

Contact

(713) 840-1411

Verbal Agreement Law: Are Contracts Enforceable When Not in Writing?

May 16, 2022 | Corporate & Business

As a general rule, oral agreements are binding and enforceable under Texas law provided that they include the required elements of a valid contract — an offer, acceptance, lawful consideration, and a “meeting of the minds.” However, Texas verbal agreement law is complex.

For example, a seemingly enforceable verbal agreement may be void if it falls under the Texas Statute of Frauds. And enforcing an oral contract can prove challenging since the injured party will need to present enough evidence to prove that the defendant breached the agreement.

 

Elements of Verbal Agreements as Defined by Texas Law

Those unfamiliar with Texas verbal agreement law often ask, “What is a verbal agreement?” A verbal agreement is simply a contract with terms that have been specified and agreed to through spoken communication.

Unlike a written agreement, an oral contract does not define the specificity of the parties’ agreement in writing. This can make it more difficult to prove a breach of contract case.

When a party breaches an oral agreement, the injured party’s focus shifts to how to prove a verbal agreement in court. Under Texas verbal agreement law, to enforce an oral contract it must have the following elements:

  • An offer
  • Acceptance
  • Meeting of the minds
  • Lawful consideration

An offer occurs when one party makes a promise to do or refrains from doing something. The other party must unambiguously accept the offer. This can be done verbally (i.e., “I agree.”) or through performance.

A meeting of the minds means that both parties understand the contract and agree to its terms. The parties must do so voluntarily and not as a result of duress, undue influence, or misrepresentation.

Consideration means that something of value is promised in exchange for performance under the agreement. Consideration must be lawful tender, such as money or services, to satisfy this requirement.

Proving that each of these elements existed can prove challenging. The plaintiff will generally need to show that the other party performed under the oral agreement. Relevant evidence can include witness statements, invoices or receipts, and other supporting documentation.

 

Contracts That Must Be in Writing to Be Enforceable

While verbal agreements are generally enforceable, certain types of transactions must be in writing. These transactions are governed by the Texas Statute of Frauds.

The Statute of Frauds is an affirmative defense in a breach of contract case. If the party raising the defense can show that the verbal agreement in dispute should have been in writing, then the contract can be declared void and unenforceable.

The types of transactions that must be in writing under the Statute of Frauds include:

  • Marriage
  • Suretyship
  • Contracts that are performed more than one year after the agreement is made
  • A promise to “answer for the debt, default, or miscarriage of another person”
  • Promises by an executor to “answer out of his own estate for any debt or damage due from this testator or intestate”
  • Contracts for the sale of real estate or lease agreements with terms that exceed one year
  • Certain payments related to mineral interests
  • Certain medical arrangements

In these types of transactions, contracts must be in writing and signed. For example, a prenuptial agreement that is not signed by the spouses will generally not be enforceable under Texas verbal agreement law.

 

Are Text Messages Legally Binding in Texas?

Text messages have become an increasingly popular way to interact and conduct business. Their popularity and the fact that they are traceable forms of communication contribute to text messages frequently being brought up in breach of contract cases. But are agreements made through text messages legally binding in Texas?

As long as the text messages satisfy the necessary conditions required for a contract then the agreement can be enforceable. This means that the text messages must show that there was an offer that was accepted by the recipient, that lawful consideration was exchanged, that the parties understood the terms, and that they had the capacity to enter into the agreement.

Moreover, under the E-Sign Act, which was signed into law in 2000, documents that are signed electronically carry the same weight as traditional paper-based contracts.

 

Statute of Frauds Limitations to Verbal Contracts

The Statute of Frauds plays an important role in determining whether contracts are enforceable under Texas verbal agreement law. The Statute of Frauds is intended to protect parties from fraud in certain types of transactions by requiring that they be in writing. The written contract must include a description of the subject matter of the agreement, the stipulations of the deal, and the signatures of all parties.

Again, some of the types of contracts that must be in writing include contracts for the sale of real estate and lease agreements for more than one year, service agreements that take more than one year to complete, and contracts related to marriage. For example, suppose you hire a landscape company to cut your grass throughout the summer and early fall. You agree to pay $30 per week starting in May and ending the first week of November. You do not sign an agreement but confirm the terms via text message. Since performance under the agreement will take less than one year, this is an enforceable agreement that is not subject to the Statute of Frauds.

But suppose instead that you own an apartment building. You agree to rent a two-bedroom apartment to a tenant for two years but do not prepare and sign a written lease agreement. Since the rental agreement is for more than one year, it  must be in writing and signed to be enforceable under Texas law.

There are a few exceptions to the Statute of Frauds. Promissory estoppel — which means that a promise may be enforceable, even without a contract — could be a counterdefense to a defendant’s argument that a written but unsigned agreement is not enforceable under the Statute of Frauds. Promissory estoppel can overcome the Statute of Frauds if the promisor should have expected that his promise would cause a definite and substantial injury, that the injury did occur, and that the promise to sign the agreement must be enforced to avoid the injury.

The second exception is partial performance. The court can enforce a contract that does not meet the Statute of Frauds if there has been partial performance under the contract.

 

Breach of Oral Contracts

Texas verbal agreement law becomes relevant when there has been a breach of contract. The injured party may file a breach of contract claim seeking damages for their injuries. The issue then becomes: how to prove a verbal agreement in court. To recover damages, the plaintiff must prove by a preponderance of the evidence that:

  • There was a valid contract;
  • They fulfilled all contractual obligations;
  • The other party did not perform their contractual obligations; and
  • They suffered damages as a result of the other party’s breach.

If the court finds that there was a breach of a valid verbal agreement, the party that breached the agreement must pay damages to the injured party. This generally means that the injured party will receive compensation that is sufficient to put them in the same position that they would have been in had the party fully performed.

 

Enforcing Oral Contracts in Texas

When it comes to enforcing an oral contract under Texas verbal agreement law, the injured party will generally encounter greater difficulties than enforcing a written agreement. Again, the plaintiff will need to show that there was a valid contract, that they performed under the agreement, that the defendant did not, and that the plaintiff was injured as a result.

In breach of contract cases involving oral agreements, it can be difficult for the court to determine what the terms of the parties’ agreements were. Unlike a written agreement where the terms are specified, the court’s interpretation will largely center on available evidence and the credibility of the parties. Relevant evidence can include witness statements, any correspondence, invoices and receipts, and other supporting documents.

 

Conclusion

Oral agreements can be binding under Texas verbal agreement law. For an oral agreement to be enforceable, it must satisfy all elements of a valid contract. Moreover, it must not include a transaction that falls under the Texas Statute of Frauds.

Proving a breach of an oral contract can be challenging since the injured party will need to present evidence, and the outcome is largely left to the court’s interpretation, which may not be what the parties originally intended.

If you need assistance preparing or enforcing a contract, contact our experienced corporate and business lawyers today for a free consultation.