The Basics of Verbal Contracts in Texas: Must-Know Information & Lawyer Tips

What Is Considered a Verbal Agreement?

A verbal agreement in Texas refers to a contract that has not been put in writing—but has been agreed to by both parties. In other words, the agreement was arrived at through oral communication. This type of contract can be legally enforceable as long as specific legal requirements are met—which can be summarized succinctly:

One party makes a clear and unambiguous offer;
The other party accepts the offer;
The offer and acceptance are supported by satisfactory consideration; and,
The subject matter of the agreement is lawful. (It’s important to note that in Texas, even if an agreement is morally offensive or based on illicit conduct, it is still enforceable so long as both parties are in agreement of material facts.)

Generally speaking , the only difference and distinction between an oral contract and a written contract is that an oral contract is not written down and may consist of a combination of verbal communication and action. The elements that make a contract valid under law are the same in either case. Note: There are some exceptions, however, as certain types of contracts must be reduced to writing under law in order to be enforceable.
Oral contracting does have its disadvantages, however. For example, it can be difficult to prove the details of an oral agreement in court if a dispute arises over the contract. In fact, most disputes involving verbal contracts start out with one party denying the agreement and refusing to honor its terms. Therefore, verbal agreements are not necessarily recognized or considered valid when they are presented in court. This is why it is recommended that all contracts be put in writing—because it’s difficult to understand the intent of the parties in the absence of a written agreement.

What Makes a Verbal Agreement Enforceable in Texas?

Except in very limited circumstances, the general rule is that verbal agreements are not enforceable in Texas courts. Courts rely on the statute of frauds to exclude most verbal agreements from enforcement, other than those for which the legislature has allowed an exception.
The statute of frauds is a list of types of contracts that must be in writing to be enforceable in Texas. The application of the statute of frauds is usually determined by examining the true purpose of the agreement and not just what the real estate contract says.
For example, an agreement to convey real property is subject to the statute of frauds, as discussed in the real estate section of this article. Not surprisingly, the statute lists a conveyance of real property as one of the contracts that must be in writing.
In analyzing real estate contracts, however, there are some issues a real estate lawyer must consider, including:
Even if an agreement does not violate the statute of frauds, it must still be enforceable under common law principles. For example, an agreement may violate the parole evidence rule if it is clear from the four corners of the contract that the parties intended their agreement to be complete. Also, several other common law principles may render an enforceable agreement unenforceable – laches, equitable estoppel, or the like.

Problems with Verbal Contracts

In Texas, parties face significant challenges in proving the existence and terms of a verbal agreement, particularly when no formal record exists such as a signed lease or a contract containing essential terms such as payment obligations, a description of the work, or a completion date. Further, attorney fees may be limited in a breach of contract case. It is not uncommon for a dispute to come down to one word against another. But there is no way to guarantee that your case will proceed to trial with a finding for performance and payment. This makes guidance on the types of evidence available to prove a verbal agreement essential. Specific documents, writings, emails and other communications can be reviewed to understand what was agreed upon. Many times consideration is present in the form of a return promise to do something or pay something at a later date. Whether the terms of an agreement are sufficiently clear is a question of fact which is according to the circumstances of each case. To this end, the availability of witnesses who can testify regarding the existence of an agreement and its essential terms is critical. Courts may allow the use of witness testimony to establish the intent of the parties.

Verbal Agreement Exceptions

While verbal agreements can be legally binding, such contracts are not universally recognized under Texas law. In some cases, the Statute of Frauds requires certain agreements to be in writing to be enforceable. The Statute of Frauds applies to exchanges involving the sale of goods valued at $500 or more; agreements pertaining to the purchase or lease of land, including an estate, interest, or use of land for a term of more than one year; exchanges of real estate, including leases of more than one year; promises to perform an agreement on which a person’s ability to pay depends on the financial strength of another, such as being a cosigner on a loan; and promises made in consideration of marriage.
If the Statute of Frauds applies to your case, you should have a qualified written agreement to protect your interests. Verbal contracts relating to matters unrelated to the subject categories above are generally valid. However, there are certain situations in which agreements cannot be binding on any party, regardless of whether or not they are in writing. Contracts that cannot be performed, or that are contrary to public policy or illegal, cannot be enforced under Texas law. For example, contracts consisting of fraud, uttering, trickery, duress, coercion, or misrepresentation of a material fact cannot be legally enforced.

Verbal Contract Dispute Cases

There are a number of other instances when verbal contracts can be breached. Take, for example, a case in Texas where there was an oral agreement between two individuals for one party to make renovations to a restaurant in exchange for rental of said restaurant, but without leases being formally signed. After a lengthy period of time, one party decided to cease making payment on the renovation costs, and reportedly started showing the intent to lease the building to another party. The other party took issue with this and sought to enforce an alleged oral contract based on quantum meruit.
Although this seems like it should fall under the one-year provision of the statute of frauds, the outcome of this case was that the court determined that the three-year statute of limitations applied because the oral agreement was considered an agreement that could be completed in less than one year. As such, the contract was not found to be actionable for breach in the manner alleged .
In another notable case invoking an exception to the statute of frauds, the court in Houston v. Solomon found that even though a mentoring deal between an executive search consultant and the CEO of a company that had contracted the consultant was never reduced to writing, the "agreement for professional services to be provided for more than one year is exempt from the Statute of Frauds [and] is not actionable on" (Houston v. Solomon, 114 S.W.3d 22 (Tex. App. 2003)). The court found, after reviewing the communications between the parties and a journal entry written by the plaintiff in the case, that the oral agreement had existed and the consultant’s promised services had been provided, so "Houston was entitled to the benefit of the bargain." The plaintiff was awarded $195,000, plus interest and attorney’s fees.
While verbal agreements can be difficult to enforce, this doesn’t mean there is no route for pursuit, so long as all other statutes of limitations and bars are cleared, of course.

How to Make a Verbal Contract Stronger

First, make a written note of the terms of the verbal agreement as soon thereafter as possible. Even if there is no likely dispute about the terms, writing down what was verbally agreed to, even in an email, can provide strong evidence later on, especially if the note/email is sent to the other party.
Second, follow the verbal agreement by taking further actions that are in line with the terms of the agreement. For instance, if the verbal agreement is to pay off an old debt, actually making payments is a form of corroboration, as well as following up with phone calls or emails.
Third, when possible, have the verbal agreement witnessed by someone who can testify about the agreement later. A witness to the agreement is even more convincing if he or she also knows about the actions that each party has taken following the verbal agreement.
Finally, ask for clarification on the terms of the verbal agreement as soon as possible. Verbal contracts that seem simple can regularly turn out to have some unexpected nuance that is important. Therefore, obtaining clarification in writing, such as through follow-up emails or even a quick text message, can be invaluable later if the other party tries to deviate from the terms of the original verbal contract.

Lawyer Tips and When to Hire an Attorney

When dealing with the nuanced world of verbal agreements and their enforceability in Texas, it’s crucial to have the guidance of a legal professional who understands such matters. Thus the purpose of this blog post. This section will explore the type of legal advice available, and when one should think about scheduling a consultation with the attorney of their choosing.
Adequate legal advice regarding verbal agreements can only be obtained with an initial consultation. Whether you are dealing with a dispute that has already arisen, or if you are simply working on drafting an ironclad and enforceable verbal agreement, consulting a legal professional is important. If you are being sued for breach of contract due to a verbal agreement , we would recommend that you consult and hire an attorney even faster than you normally might—when dealing with the threat of legal action, consultation is not enough, and quick action is almost always required to preserve your legal rights.
In some cases, Texas law does not require that a contract be in writing to be enforceable. However, the practical benefits of having a properly written contract are overwhelming, especially when attempting to avoid future litigation. It’s wiser to invest in legal consultation and proper documentation than to attempt to litigate months or years in the future over a potential lack of clarity.
If you find yourself faced with a dispute over a verbal agreement, consultation with an attorney in a timely manner is likely warranted.