There are many types of oral contracts in Texas that are legally binding and enforceable under the law. For example, a homeowner might make an agreement with a landscaping service for weekly yard maintenance without any documentation. This is an example of a binding and enforceable agreement, and failure of the homeowner to render payment would be actionable by the landscaping company.
While Texas law recognizes verbal agreements as enforceable, there are some types of contracts that require a writing to be enforceable. Most of these types of contracts are outlined in the Statute of Frauds (Chapter 26 of the Business and Commerce Code), and include things like contracts for sale of real estate and agreements which are not performable in under a year.
Conspicuously absent from the list of contracts requiring a writing in the Statute of Frauds are agreements related to a commission for acting as a real estate broker. This exclusion in the Statute of Frauds often leads realtors, brokers, and agents to contact our firm to proceed on a suit to recover a real estate commission based on an oral agreement. We are often required to remind real estate professionals that the Statute of Frauds does not include a comprehensive list of agreements in Texas that require a writing.
Real estate agents are also regulated under what is known as the Texas Real Estate Licensing Act (TRLA) as found in Chapter 1101 of the Occupations Code. Under the TRLA, a person may not maintain an action to recover a commission for which a real estate license is required. Tex. Occ. Code Ann. § 1101.806 (West). A real estate broker must have something in writing to be able to successfully sue on a commission.
Our firm has found that it is common for real estate agents under the pressure of losing a client to perform real estate services without a clear, traditional contract for a commission. After a transaction closes, an unscrupulous seller or buyer may seek to avoid payment of a commission. Our firm might then be forced to maintain an action based on emails and text messages to support some type of commission agreement. Conversely, our firm might also be employed to defeat a claim for commission by an unscrupulous real estate broker without a clear written agreement.
Suits for real estate commissions in Texas can be complex, and there are other issues and requirements within the law that are outside of the scope of this article. If you are contemplating a suit for commission or being forced to defend an action, it is important to hire a competent real estate attorney.
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