Oral Versus Written Contract: A Primer

Dec 12, 2024

In Texas, contracts can be legally binding whether they are agreed upon verbally or in writing. The basic elements required for a contract to be valid are an (1) existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) material breach by defendant, and, (4) damages.

The Statute of Frauds and Oral Contracts
The statute of frauds is a legal doctrine requiring certain contracts to be in writing to be enforceable. In Texas, statute of frauds is codified into Chapter 26 of the Texas Business and Commerce Code, and mandates (amongst other things) that all contracts must be performable within one year of execution, or otherwise they may be void.

Exceptions and Alternative Causes of Action
When an oral contract is voided by the statute of frauds, all might not be lost. Texas law provides several alternative causes of action that might offer recourse to a party aggrieved by the unenforceability of an oral agreement which goes beyond the scope of one year.

  1. Promissory Estoppel: This principle applies when a party reasonably relies on a promise to their detriment. To claim promissory estoppel, one must prove (1) a promise was made, (2) the promise was reasonably relied upon, and (3) the reliance resulted in a detriment that justice can only remedy by enforcing the promise.
  2. Fraud: If an oral contract is not enforceable due to the statute of frauds, a party may still have a cause of action for fraud if it can be demonstrated that (1) a false representation was made with knowledge of its falsity or ignorance of its truth, (2) the representation was intended to be acted upon, (3) the party acted in reliance on the representation, and (4) suffered injury as a direct result of the action taken in reliance on the representation.
  3. Quantum Meruit: Translating to “as much as he has deserved,” quantum meruit allows for recovery for services rendered when no explicit agreement was in place. Elements include (1) services were provided, (2) the services were accepted, used, and enjoyed, (3) the recipient of the services was reasonably notified that the plaintiff expected compensation, and (4) the services were rendered with the expectation of payment.
  4. Money Had and Received: This cause of action requires the plaintiff to prove that the defendant holds money that in equity and good conscience belongs to the plaintiff. It is an equitable doctrine used to prevent unjust enrichment.

However, it is always best to have the contract in writing. Not only does one then avoid possibly having an unenforceable contract, the terms of the contracts are also firmly established, and are not up for debate.