The Statute of Frauds—When a Contract Must Be in Writing

What Are the Situations Where an Oral Agreement May Not Be Enforceable?

Over the past few months, we have taken a closer look at the five requirements of a valid and enforceable contract:

• An agreement based on an offer and an acceptance of that offer
• Consideration, meaning that each party either gives something of value or refrains from doing something they have a legal right to do
• Willingness of each party to knowingly enter the contract
• “Contractual capacity,” meaning that all parties have the requisite state of mind to understand the agreement
• Legal purpose

Nowhere among these elements of a binding contract will you find any reference to whether the contract needs to be in writing. Does that mean that oral contracts are generally enforceable? As we shall see, that’s not always true. There are specific situations in Texas, as set forth in the “statute of frauds,” where an agreement may be voided if it has not been memorialized in a written document.

What Is the Statute of Frauds?

The statute of frauds is a written law, enacted by the Texas legislature, that identifies those types of contracts that must be in writing to be enforceable. Under Texas law, the following agreements require a written document:

• Contracts “in consideration of marriage,” i.e., where one or both parties are promising to do something in exchange for marrying the other party
• Any agreement involving an interest in land or real estate, including sales of real property, rental agreements, and other contracts involving property use or ownership
• Contracts that cannot be fully performed within one year of the date of execution
• Surety or guaranty agreements, where one party promises to assume or pay the debts of the other in exchange for valid consideration
• Sales of goods for an amount in excess of $500

What Is the Legal Effect If Such a Contract Is Not in Writing?

A contract that falls under the statute of frauds, but is not in writing, will not be enforceable in a court of law. Accordingly, a party to such a contract will not have a legal claim in the event of a breach.

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to businesses and business owners throughout southeast Texas, handling all matters related to business formation. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.