According to the Houston Bar Association’s Consumer Law Handbook, a contract is a promise that rises to the level of legal enforceability. To be a legal contract, the promise must be given in expectation of receiving something of value in return.

Both parties give up something to make the transaction happen. For example, when a person agrees to buy a building from another, the buyer is giving up money and the seller is giving up a property. This concept is called consideration.

Does a contract have to be in writing?

Under the Texas Business and Commerce Code, a contract does not have to be in writing. Verbal contracts may be enforceable if they contain the required consideration. However, some types of contracts, those covered by the Texas Statute of Frauds, do have to be in writing to be valid. Such contracts include agreements:

  • Involving the sale of real estate
  • Covering loans for more than $50,000
  • Related to commissions on some oil, mineral and gas sales
  • Requiring more than one year to complete, including multiyear leases
  • Involving some types of medical care
  • Related to paying off debt for someone else
  • Involving marriage or related to cohabiting

At minimum, a contract subject to the Statute of Frauds must include the following:

  • The identity of the parties
  • A description of the property that is the subject of the contract
  • The terms of the agreement
  • The signatures of the parties

It is recommended that the consequences to either party for breaching the contract be included as well.

Can a minor enter into a contract in Texas?

The law defines a minor as a person under the age of 18 years. While a minor can enter into a contract in Texas, the law allows the minor to exit the contract if he or she pleases. That means if an adult enters into a contract with a minor, the minor can hold the adult to the contract, but the adult cannot enforce it against the minor. Generally speaking, it is better to avoid contracting with minors.

Understanding the basics of contract law is important to protecting a business from contract breaches and commercial litigation. A few examples of such litigation are a breach of contract for failure to perform contract obligations, warranty issues, employee conflicts and issues between business partners. These disputes consume time, money and resources that are better spent on growing the company. It is important to consult with legal counsel to understand the risks of entering a contract at the outset and also any time a dispute arises.