In a litigious world, best practice is to secure a written contract for agreements whenever possible.
This avoids relying on “he said, she said” testimony. But sometimes this is not possible. Are verbal contracts binding?
Verbal contracts are legally binding and enforceable if they meet certain requirements.
If the verbal contract is otherwise valid, it is enforceable.
The contract must meet legal requirements such as specificity and adequate consideration. However, not all verbal contracts are binding under Texas law.
By law, certain agreements must be in writing before they become enforceable.
Requirements for a Valid Contract in Texas
A valid contract must have the following elements:
- An offer,
- Acceptance of the offer,
- A meeting of minds, and
Additionally, some—but not all—types of contracts must be in writing.
Offer and Acceptance
Contract formation occurs when one party makes an offer to do something in return for something else. Another party must accept the offer to create a valid contract.
To determine whether a verbal contract exists, the court looks at the course of communication between the parties. The court also analyzes the circumstances surrounding the communication.
Meeting of the Minds
The parties must show mutual consent before a court will enforce a contract. The parties must freely communicate their agreement and its terms to one another.
These consent requirements apply whether the parties agreed by handshake or formal contract. The parties must freely communicate their agreement and its terms to one another.
A valid contract requires adequate consideration. Consideration means something of value that is promised in exchange for the specified action.
The presence of consideration distinguishes contracts from gifts. Consideration can include money, services, or an agreement to refrain from doing something.
The item exchanged must be legal. As a general rule, all parties to the contract must give consideration.
Certain Agreements Must Be in Writing
Although many contracts can be verbal, Texas’s statute of frauds provides that certain contracts must be in writing:
- A will or trust;
- A promise to be answerable for the debt or default of another person;
- Marriage, except common law;
- A contract for the sale of real estate;
- A contract that lasts for more than one year from the date of the agreement;
- A real estate lease for more than one year;
- An oil or gas mining lease;
- An agreement or warranty of cure made by a healthcare provider about medical care;
- A sale of securities;
- A sale of goods priced at $500 or more under the Uniform Commercial Code; and
- Guarantee, surety, or any other contract to take up the duty of another.
To enforce a contract subject to the statute of frauds, the contract must be in writing. The party against whom enforcement is sought must also sign the contract.
Are Verbal Contracts Binding in Texas?
Unless the agreement must be in writing, a verbal agreement can be legally binding in Texas if it is otherwise valid.
Witness statements, related correspondence, invoices, and other supporting documents can be used to prove the elements of a breach of contract claim.
To recover for a breach of contract in Texas, you must prove:
- There was a valid contract;
- The complaining party fulfilled that party’s contractual obligations; and
- The complaining party suffered damages or harm as a result of the other party’s breach of their contract obligations.
The plaintiff must prove the elements by a preponderance of evidence. This means that the plaintiff needs to show that the fact in dispute is more likely than not.
If the court finds a breach, the breaching party must compensate the injured party by putting them in the same position as if the breaching party had performed.
Are Verbal Contracts Enforceable?
Although verbal contracts are enforceable, claims for breaches of verbal contracts are more difficult to prove.
Thus, lawsuits for a breach of a verbal contract can be more expensive. It is prudent to enter a written contract whenever possible.
Nevertheless, if a dispute arises relating to a verbal contract, don’t assume that you’re out of luck.
A party to a verbal contract can ask the court to make the breaching party follow contractual obligations.
The relief available will depend on the nature of the contract and the breaching party’s obligations.
Consult with Experienced Texas Contract Attorneys
If you need to answer the question, are verbal contracts binding in Texas? Massingill can help.
Our contract attorneys have the experience to guide you through a contract dispute. A contract attorney can also provide guidance on how to avoid one.
We cut through the legalese and provide you with straightforward solutions.
If you object to attempts to enforce a contract—or need to enforce a verbal agreement in Texas—Massingill can help. We can assess the facts of your case. We’ll help you keep your business on track.
Contact us today or contact us online to learn more about your options.