The general rule is that oral contracts are enforceable. However, contracts involving certain types of transactions must be in writing. The legal profession often refers to this requirement as the “Statute of Frauds.” The name derives from the purpose of the rule, which is to prevent people from fabricating agreements to perpetrate a fraud (e.g., “A claims B orally agreed to sell his farm to A for $1,000 since A took care of B’s mom in her old age.”)
Section 26.01 of the Texas Business & Commerce Code states:
PROMISE OR AGREEMENT MUST BE IN WRITING. (a) A promise or agreement described in Subsection (b) of this section is not enforceable unless the promise or agreement, or a memorandum of it, is
(1) in writing; and
(2) signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him.
(b) Subsection (a) of this section applies to:
(1) a promise by an executor or administrator to answer out of his own estate for any debt or damage due from his testator or intestate;
(2) a promise by one person to answer for the debt, default, or miscarriage of another person;
(3) an agreement made on consideration of marriage or on consideration of nonmarital conjugal cohabitation;
(4) a contract for the sale of real estate;
(5) a lease of real estate for a term longer than one year;
(6) an agreement which is not to be performed within one year from the date of making the agreement;
(7) a promise or agreement to pay a commission for the sale or purchase of:
(A) an oil or gas mining lease;
(B) an oil or gas royalty;
(C) minerals; or
(D) a mineral interest; and
(8) an agreement, promise, contract, or warranty of cure relating to medical care or results thereof made by a physician or health care provider as defined in Section 74.001, Civil Practice and Remedies Code. This section shall not apply to pharmacists.
In addition, Section 26.02 of the Texas Business & Commerce Code requires certain types of loan agreements to be in writing.
Exceptions to Statute of Frauds
Sometimes, transactions which seem to squarely fall within the statute of frauds will still be enforced. There are a number of exceptions.
For example, partial performance is an exception to the statute. In the case of Bookout, an oral agreement to purchase a chiropractic clinic was enforceable because the buyer actually took possession, operated the clinic and made payments to the seller.
There are other exceptions to the statute of frauds, and they can become quite complicated. It is best to consult an attorney when confronted with contract disputes because non-attorneys will typically have no idea where to begin.
Implied Contracts
What is an “implied” contract? Well… whatever it is, it is not a contract.
Sometimes, people do not have a contract, but their conduct leads courts and juries to imply a contract. This legal doctrine is often referred to as quantum meruit.
In the case of Kam, the court stated:
The elements of a quantum meruit claim require proof that:
1) valuable services were rendered or materials furnished; 2) for the person sought to be charged; 3) which services and materials were accepted by the person sought to be charged, used and enjoyed by him; 4) under such circumstances as reasonably notified the person sought to be charged that the plaintiff in performing such services was expecting to be paid by the person sought to be charged.
A classic example where quantum meruit would imply a contract is where A hires a painting company. The crew shows up at B’s house by mistake, and B lets them in and watches them paint his house. After allowing the crew to paint his house, it would be unfair for B to refuse payment.
Lesson
With some exceptions, oral contracts are enforceable, and even when there is no contract, the doctrine of quantum meruit can imply a contract to pay for goods or services.
Still, it is best to reduce agreements to writing and to require signatures of the persons who are expected to comply with them.