Verbal Contracts and Texas Law

Verbal Contracts do exist and are legally enforceable in Texas,  as a matter of law,  if they meet necessary legal requirements and specificity. Adequate consideration must be given between the two parties of a verbal contract to make it binding. Adequate consideration is defined in two ways: (1) having a mutual reciprocal exchange [bargained for exchange] or (2) having legal value [an individual must do something that he is not legally obligated to do]. If adequate consideration is given between both parties and all other legal requirements are met, then a verbal contract may be held valid in a court of law.

Verbal contracts are also limited by the Statute of Frauds. The Statute of Frauds requires certain types of contracts to only be in writing purportedly to avoid defrauding citizens.

The following must be in writing:

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(1)  Making a will or Trust

(2)  A contract to answer for the duty of another (Guarantee/Suretyship)

(3)  Marriage (exception common law marriage)

(4)  Sale and contracts affecting Land

(5)  A contract that lasts longer than 1 year from the time it is made and which cannot be performed in one year

(6)  Any sale of goods for a price of $500 or more

(7)  Sales of securities

Verbal contracts in Texas have limitations. Let’s say that a contractor wanted to paint the outside of your house. You decide to pay the contractor seven thousand to paint the outside of the house and the job will take approximately 3-8 weeks. If you have a verbal contract with the painter and pay him this could be legally enforceable in a court of law. The verbal contract with the painter is not invalidated by any provision set above in the Statute of fraud. It is a contract for service, under one year, and adequate consideration has been given with the payment of seven thousand dollars.

Here is another example of a verbal contract that will not be upheld in a court of law. An individual buys fifty acres from his neighbor for fifty thousand dollars under a verbal contract. Before the fifty thousand dollars is exchanged, the neighbor decides to pull out of the deal. This verbal contract would not be enforceable in court and the buyer cannot enforce the contract because it deals with real estate (land).  This is one of the specific types of contracts that must be in writing because of the Statute of Frauds. The individual may get his money back but the point is he cannot enforce the contract since it is not in writing.

The best course of action in the litigious world we live in is to cover your tracks by securing a written contract in almost all circumstances. Do not rely on the limited options that allow a verbal contract to be enforced because in court you will have to deal with the “He said, she said” testimony and incur significant cost of litigation unnecessarily.