Requirements of an Enforceable Contract in Texas

Enforceable Contracts in Texas

When parties choose to collaborate on a business venture, they agree to work together in a way that is mutually beneficial. The agreement may be informal, based on a verbal understanding or a handshake, or it may be more formal, such as a licensing agreement or a strategic partnership.

The first component of a contract is that both parties agree to enter into some type of agreement which is mutually advantageous. At that point, one party makes an offer to the other. The language of that offer must be clear and unequivocal, providing clarity about what exactly each party expects from the relationship. See Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d 231, 235 (Tex. App.-Houston [1st. Dist] 2008, no pet.).

Another key component to a valid contract is assent, sometimes referred to as a meeting of the minds, meaning both parties accept the offer. If one party rejects the offer, no contract exists. A party may seek to modify an offer, known as a counteroffer, but ultimately an offer must be accepted as is. In order to be viable and legally binding, the terms of the offer should be clearly outlined. It should, for example, set a specific timeframe, delegate duties, and address such issues as confidentiality and exclusivity. While it is not a requirement, a contract is best put into writing to maximize the success of the contractual agreement and its enforceability. Weynand v. Weynand, 990 S.W.2d 843, 846 (Tex. App.- Dallas 1999, pet. denied).

Consideration for each party is another essential component of a contract. The contract should define how exactly each party will benefit. Perhaps one party accepts money in exchange for allowing another to use intellectual property, for example. While financial compensation is not a requirement of a contract in Texas, most contracts do focus on money as a consideration.

Parties in a contract must be capable of entering into a contractual agreement. While anyone can enter into a contract, if a party does not have the capacity to understand the obligations of the contract, that contract is voidable. If a minor signs a contract with an adult, for example, the adult cannot hold the minor liable for breach of contract. However, because an adult is capable of understanding contractual obligations and implications, that adult is held liable for a contract with a minor.

A contract is much more than a promise or agreement to do something; it is a legally binding document. Although a relationship may seem amiable and easy-going, it’s still best for an experienced attorney to help draft and/or closely review any contract before signing.

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