10 Things Texans Must Know About Contracts

1. Might Not Need To Be In Writing

A common misconception is that contracts must be in writing to be enforceable. That is not the case in Texas. In certain situations, verbal contracts are just as binding as those in writing. The parties must still reach an agreement as to the core terms, but there is no rule in Texas that a contract MUST be in writing. However, it is good advice to put your agreements in writing. 

2. Might Be Able To Get Attorney's Fees

Texas Civil Practice And Remedies Code §38.001 states that a person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for an oral or written contract. Attorney's fees can often times cost as much or more than the cost of the broken agreement, so asking the court for attorney's fees is a powerful remedy in breach of contract actions. 

3. Might need to be in writing

 I know, I know, I just told you that contracts don't NEED to be in writing to be enforceable. Well, there's an exception to every rule. In Texas, agreements lasting longer than one year, agreements for the sale of real estate, agreements for the sale of goods over $500, Surety agreements, estate agreements, marital agreements and medical care promises, and recision or modification of an existing agreement all must be in writing to be enforceable. If you think you might be about to enter into a verbal agreement that falls in one of these categories, contact an attorney immediately or the agreement might not be enforceable. 

4. The Court Might Make The Parties Live Up To Their End of The Agreement

Specific Performance is a remedy for a breach of contract. This means that the court may force a party to live up to their end of the bargain. This typically happens in Texas with the sale of real estate because there usually isn't another piece of property that is identical to the property subject to the agreement. Specific performance is also available in a situation where money would not be sufficient to compensate the injured party.

5. The Court Might Reform the Agreement

Sometimes an agreement is worded in such a way that it is difficult to determine what the parties are required to do. There might be a mistake or misunderstanding that makes the current agreement unworkable for one or all the parties. The objective of reformation is to correct a mutual mistake made in the preparation of a written instrument so the instrument reflects the original agreement of the parties. If an oral agreement that preceded a written agreement is different from the written agreement, the court will reform the written agreement to conform to the oral agreement.

6. A Course of Dealing Might Alter The Agreement

In situations where the parties deal with each other regularly, the conduct of the parties alone can create a contract. If the conduct reasonably demonstrates that the parties had a common understanding, a court can find that a contract exists, even if the parties never expressly stated, orally or in writing, their intention to exchange promises.

7. Contracts Must Be Mutual

A contract cannot be completely one sided. Both parties must promise to perform an obligation and/or receive some benefit. An agreement that has a provision that the contract is cancellable at only one parties decision or where one party receives all the benefit but undertakes no obligation, might not be an enforceable contract at all.

8. The Law Might Be More Strict On Business or Other Sophisticated Parties

Contract law often times will afford more protection to an unsophisticated party than a sophisticated one. Businesses and business owners are often times considered to be more sophisticated than their clients. This might mean that the law will hold a business more strictly to the terms of a contract than other unsophisticated party.

9. Written Contracts Can Be Better Than Handshakes

People are often reluctant to enter into a contract with another because, "My word is my bond and a handshake is all I need." However, contracts often clarify what everyone is supposed to do to be in compliance with the agreement. This can often make better business relationships than a "handshake" agreement. A good contract can avoid problems before they start.

10. There Might Be A Contract Even If Some Terms Are Missing

Sometimes the absence of a term in the contract such as delivery date, price, or quantity, might not prevent a court from holding that there is a binding contract. This is primarily the case when the contract is for the sale of goods. Courts can often times fill in the holes in the agreement with industry standard or other agreed upon terms. 

11. Disclaimer

This article is not a substitute for licensed, competent legal counsel. This article is intended to educate the reader in broad terms, but cannot be relied upon to provide legal advice in a specific circumstance. Your case and situation are as much an individual as you are. The rules set forth are general in nature and significant exceptions are not addressed. Anyone seeking specific advice regarding a particular circumstance should engage a qualified professional.