The "Statute of Frauds" Defense in Texas

Posted over 3 years ago. Applies to Texas, 1 helpful vote

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Contracts, in many instances, do not have to be in writing to be legally binding. However, many states, including Texas, have a law known as the "statute of frauds" which requires that some contracts must be written to be valid. In Texas, contracts involving the following are subject to the statute of frauds and, generally, have to be in writing to be enforceable: a. the sale of real estate; loan agreements involving more than $50,000; b. contracts for commissions from certain oil, gas or mineral sales; c. contracts that cannot be performed within one year; d. contracts to pay off someone else's debts; e. leases for more than one year; f. certain medical care contracts; and g. contracts concerning a marriage or non-marital cohabitation must be in writing and signed by the person making the agreement. In Texas, the "statute of frauds" is found in Chapter 26 of the TEXAS BUSINESS & COMMERCE CODE and it is titled "STATUTE OF FRAUDS." However, a court may employ the principals of equity to avoid the application of the statute of frauds. Equity will act to avoid the statute of frauds in circumstances where enforcing the statute would itself amount to a fraud. Before using equity to circumvent the statute of frauds, the Texas Supreme Court has consistently required a showing that fraud would result in not doing so. Those circumstances are limited, however, because otherwise the exceptions would render the statute meaningless: The Statute of Frauds is the Legislature's directive that courts enforce promises covered by the statute only if such promises are in writing. Equity can avoid the strictures of that directive only by some positive rule which will insure its exercise for . . . the prevention of an actual fraud as distinguished from a mere wrong . . . so surely as to leave the statute itself, through the exactness of the exception, with some definiteness of operation. Promissory estoppel and partial performance have been recognized as equity-based exceptions to the traditional statute of frauds. Promissory estoppel allows enforcement of an otherwise unenforceable oral agreement when (1) the promisor makes a promise that he should have expected would lead the promissee to some definite and substantial injury; (2) such an injury occurred; and (3) the court must enforce the promise to avoid the injury. Promissory estoppel avoids the traditional statute of frauds when the alleged oral promise is to sign an existing document that satisfies the statute of frauds. Under the partial performance equitable exception, an oral agreement that does not satisfy the traditional statute of frauds but that has been partially performed may be enforced if denying enforcement would itself amount to a fraud.. The actions asserted to constitute partial performance must be "unequivocally referable" to the alleged oral agreement and corroborate the existence of that agreement; they must be such as could have been done with no other design than to fulfill the particular agreement sought to be enforced; otherwise, they do not tend to prove the existence of the parol agreement relied upon by the plaintiff. When you are reviewing your situation to determine whether the statute of frauds may interfere with your ability to enforce your contract, keep in mind that some factual situations, such as those briefly described above, may provide you with sufficient argument to overcome the defendants' defense and give you an opportunity to enforce the contractual obligation. As is almost always the case, though, every situation is different and dependent of the facts of the transaction.

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Charles B. "Brad" Frye, Attorney at Law

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