Most people believe that that in order to be enforceable a contract must be in writing. However, when people are busy to meet a deadline they may not have time to get a written contract or they simply trust the other person and a hand shake is good enough. While oral contracts can be enforceable, particularly where there has been partial performance of the contract, there are certain contracts that must always be in writing. The Statute of Frauds originated under the English common law and has been codified by most states in this country. The purpose of the Statute of Frauds is to prevent the enforcement of an alleged oral contract with respect to certain transactions unless the contract is in writing.
In Texas, the Statute of Frauds is codified in Chapter 26 of the Texas Business and Commerce Code and provides that certain types of agreements are not enforceable unless they are in writing and signed by the person against whom the agreement is sought to be enforced or by someone lawfully authorized to sign for such person. The most common types of agreements that must be in writing include the following:
- a promise by an executor to pay from his own property the debts of an estate;
- a promise by a person to answer for the debt of another person;
- a contract for the sale of real estate;
- a lease of real estate for a term longer than one year;and
- an agreement which cannot be performed within one year following the date of the agreement;
There are, however, some exceptions to the requirement of that these types of contracts be in writing and the case of Jose Antonio Avila v. Luisa Gonzalez 974 S.W.2d. 237 (Tex.App. –San Antonio 1998) discusses some of those exceptions. The lawsuit arose from a three-year domestic relationship between the parties and an agreement between the two regarding the purchase of the home they shared in San Antonio, Texas. Gonzalez verbally agreed to contribute $60,000 up front for the purchase of the home and Avila verbally agreed to make the monthly payments on the remaining debt. Gonzalez claimed that she fully performed her part of the agreement but that Avila ceased making the monthly mortgage payments after Gonzalez initiated legal action against him for breach of another unrelated contract.
Avila asserted that the agreement concerning the purchase of the home fell within the Statute of Frauds because it could not be performed within one year. The court disagreed and found that there was sufficient evidence that the Statute of Frauds did not apply because partial performance of the contract removed the contract from the Statute of Frauds. The court stated that when the application of the Statute of Frauds would injure the person relying on the contract and allow the other party to reap an unearned benefit, partial performance will allow a remedy even if the contract was required to be in writing under the Statute of Frauds. Additionally the court indicated that where one party has fully performed their duties under the contract, the Statute of Frauds may be unavailable to the other party if he knowingly accepts the benefits and partly performs his part of the agreement.
The court found that Gonzalez had fully performed her part of the agreement when she put $60,000 of her own money down to purchase the house. In addition, the court found that Avila partly performed the agreement in that he paid the monthly mortgage on the home for almost two years and ceased to make the payments only after Gonzalez filed suit against him.
Avila also claimed that the agreement to purchase the home had to be in writing because it was an agreement to purchase real estate. The court also disagreed with this argument and stated that this provision of the Statute of Frauds applies only to agreements to buy and sell real estate between owners and purchasers. The agreement between Gonzales and Avila was simply an agreement between two buyers as to how they would delegate the duties between them when they purchased a home.
Avila also argued that the contract fell within the Statute of Frauds because it was a promise by one person to answer for the debt of another. However, the court held that this was not an agreement to answer for the debt of another; the oral agreement simply reflected the parties differing duties in their joint purchase of a home.
While it is always a good idea to put your contracts in writing, the failure to do so may not be fatal to your case even when the agreement is the type of agreement that is required to be in writing under the Statute of Frauds.
At the Law Office of Stephen O’Rear, P.C. we help people with their contract disputes.