Business Contracts in Texas
A contract is defined as a promise or set of promises with legal consequences. Normally, contractual promises are enforceable in a court of law. The law gives official recognition of the written contractual promises and offers remedies when the promises are not fulfilled.
The Supreme Court of Texas has noted that every contract includes an element of confidence and trust that the parties will faithfully perform their obligations. There is no duty of good faith and fair dealing unless the duty is created by express language in the contract or a special relationship of trust and confidence exists between the parties to the contract.
In Texas, the requirements for a valid written contract are:
1) an offer;
2) an acceptance in strict compliance with the terms of the offer;
3) a meeting of the minds (which is actually a subpart of the accepted elements, not an independent element;
4) each party’s consent to the terms;
5) consideration; and
6) execution and delivery of the contract with the intent that it be mutual and binding.
A basic element of the contract is the promise, which may be an express or implied promise made by one party for the purpose of assuring another person that a particular action or restraint from a particular action will occur. This is objectively determinable from the parties’ words or actions and not from either party’s subjective intentions.
Contracts may be unilateral or bilateral. A unilateral contract has only one promisor; the promisee makes no commitment. Mutuality of obligation is not essential for a unilateral contract to be formed. A unilateral contract is completed by the promisee’s performance of the act or acts called for by the promisor, not by the promisee’s making of any reciprocal promises. The promisor becomes bound to provide the promised benefit when the promisee delivers the bargained-for performance. There is no binding unilateral contract unless the promisee performs, or at least partly performs the acts requested by the promisor. Until such time, the promisor may revoke its offer. An option agreement is a common unilateral contract. An option agreement is a promise, or offer, by the optionor that the optionee may accept or reject. Until the option is exercised in accordance with the offer, the contract remains unilateral. The contract becomes binding when the option is properly exercised.
A bilateral contract is one in which there are mutual and/or bilateral promises made between the parties. If the parties have entered into a bilateral contract in which their promises are the only consideration for the agreement, their obligations must be mutual and binding for the contract to be valid. A common example of a bilateral contract is one in which one party promises to deliver goods to the other, and the other party promises to pay the specified purchase price.
There must be an offer, an acceptance and consideration for a contract to be recognized and enforceable. To prove a valid offer a party must show
1) the offeror intended to make an offer,
2) the terms of the offer were clear and definite, and
3) the offeror communicated the essential terms of the offer to the offeree.
The offer may dictate the manner, time and place of acceptance of the offer. Under such circumstances, an offer not accepted in a timely or proper manner lapses. When an offeree rejects an offer, the offer is terminated.
An acceptance must be identical to the offer or there is no binding contract. Generally, an acceptance must not change or qualify the terms of the offer or the offer is rejected. When an offer prescribes the manner of acceptance, its terms must be followed in such manner of acceptance in order to create a contract. If an offeree fails to accept in the prescribed manner and attempts to accept in some other manner, a contract is formed only if the offeror waives strict compliance with provisions concerning the manner of acceptance.
An oral offer may be accepted by execution of a written instrument that embodies the terms of the agreement.
Further, a written offer may, in some circumstances, be accepted orally. Acceptance may also be shown by conduct.
An acceptance is valid only if made before an offer is revoked or lapsed. An acceptance takes effect and creates a contract when it is communicated to the offeror. Acceptance is not effective when some abstract conduct other than communication to the offeror occurs. The accepting party may change his or her mind until the act of acceptance is actually communicated to the offeror.
Although an acceptance is effective only when communicated to the offeror, when an offer may be validly accepted by mail, the “mailbox” rule provides that the communication has been made and the contract is binding when the offeree deposits a properly addressed letter of acceptance in the mail, regardless of whether it is actually received by the offerror.
Mutual assent is often described as a “meeting of the minds.” Evidence of mutual assent in written contracts generally consists of the parties’ signing the contract and delivery of the contract with the intent to bind. To determine whether a meeting of the minds existed, a court reviews what the parties actually said and did. The parties’ failure to agree on a material term precludes a meeting of the minds necessary for a valid contract.
In some cases, what appears to be a valid offer and acceptance results in only a voidable contract because one party’s consent was, in fact, procured by fraud, undue influence, duress, or mistake.
Under Texas law, a party must protect personal interests by reading a contract before signing it. Absent fraud, the person is not excused from the consequences of failing to meet this obligation. If a person signs a contract without knowledge of its contents, they are presumed to have consented to the terms of the contract. Claims of belief that provisions differed from those plainly set out in the written contract are not generally admissible.
Are you having business contract problems or possible contract fraud issues? Do you need a business contract or an employment contract reviewed by an attorney? Contact Dallas business contract and civil litigation lawyer Mark Nacol today!