Are Verbal Contracts Binding in Texas?

Legalities of Verbal Contracts in Texas

Verbal contracts are often confusing because of a mixture of myth and misunderstanding. In Texas, the answer to whether these agreements are binding isn't a simple yes or no answer. It's a nuanced journey through the state's laws, particularly the Statute of Frauds. 

At its core, Texas law does recognize verbal contracts as binding, with notable exceptions. The key piece of legislation governing this area is Chapter 26 of the Texas Business and Commerce Code, known as the Statute of Frauds, that specifies which types of contracts must be in writing to be enforceable.

The Statute of Frauds: What Needs to Be in Writing?

The Statute of Frauds carves out specific scenarios where a written contract is a legal necessity. Some of the more important agreements that must be in writing include:

  • Debts of Another: Any agreement where one party agrees to answer for the debt of another, such as personal guarantees, must be in writing.
  • Marriage and Non-Marital Cohabitation: Contracts related to marriage or agreements for non-marital conjugal cohabitation require a written form.
  • Real Estate Leases and Sales: Leases lasting more than a year and any contract for the sale of real estate must be documented.
  • Loan Agreements Over $50,000: These agreements also fall under the Statute of Frauds.
  • Long-Term Agreements: Contracts that cannot be performed within a year from their making must be in writing.


The Reality of Verbal Agreements

While the law allows for verbal contracts in many situations, proving their existence and terms becomes the challenge. Verbal agreements are enforceable, but evidence is key. This evidence could be in the form of performance, such as payment made under a verbal real estate contract, which can override the writing requirement in rare instances.

However, relying solely on verbal agreements is risky. The lack of a written contract can lead to disputes over the terms, with each party having potentially different recollections or interpretations. As attorneys, we always recommend securing agreements in writing to provide clarity and legal standing.

In the realm of legal disputes, proving the existence and terms of a verbal contract can be challenging. Documentation, witnesses, or acts of performance can support the claim, but these are not always available or sufficient. The statute of frauds serves as a safeguard, ensuring that for certain significant agreements, there is a tangible, verifiable record.

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