Texas contract law is built from several statutes working together: the Business and Commerce Code, the Property Code, and the Civil Practice and Remedies Code each set rules that decide whether an agreement is enforceable, what must be disclosed, how long you have to sue, and what you can recover if the deal falls apart. Getting one requirement wrong can leave you without a remedy, so the basics matter whether you are signing a lease, hiring a contractor, or buying a car.
What Makes a Contract Enforceable
Texas courts look for the same core elements recognized across the country. There must be an offer, acceptance, and consideration, meaning each side gives up something of value or takes on an obligation. A promise to paint a house in exchange for payment is consideration. A vague statement that someone “might” pay is not, because there is no firm commitment.
Both parties must have the legal capacity to enter the agreement. Anyone under 18 can generally void a contract in Texas, except for necessities like food, clothing, and shelter. Someone who lacked the mental ability to understand what they were agreeing to may also have grounds to void the deal. And the purpose of the contract must be legal. An agreement to do something unlawful is void from the start, no matter how carefully it is drafted.
Which Contracts Must Be in Writing
Texas’s Statute of Frauds, in Chapter 26 of the Business and Commerce Code, requires certain agreements to be in writing before a court will enforce them.1Justia. Texas Business and Commerce Code Title 3 Chapter 26 – Statute of Frauds The writing does not have to be a formal contract, but it must contain the essential terms and be signed by the party you are trying to hold to the deal. Three categories come up most often.
Real Estate Transfers
Any agreement to sell or transfer an interest in real property must be in writing. That covers land sales, leases longer than one year, and agreements to assume someone else’s mortgage. Property Code Section 5.021 requires that a conveyance of a freehold estate or any estate lasting more than one year be written, signed, and delivered by the person granting the interest or their authorized agent.2State of Texas. Texas Property Code Section 5.021 – Instrument of Conveyance The writing must also identify the land specifically enough that a reader can tell what property is being sold. Vague descriptions like “the property on Main Street” have sunk otherwise solid deals.
Sale of Goods Over $500
Texas adopted the Uniform Commercial Code, and Section 2.201 of the Business and Commerce Code requires a written agreement for any sale of goods priced at $500 or more.3Justia. Texas Business and Commerce Code Section 2.201 – Formal Requirements Statute of Frauds The writing must be signed by the party being sued and must state a quantity. Courts will not fill in a missing quantity, so leaving it out kills the contract.
Three exceptions can save an oral agreement for goods over $500. If goods were specially manufactured for the buyer, cannot easily be resold, and the seller has already started substantial production, the deal can still be enforced. So can an oral agreement the defendant admits to under oath. And if goods have already been accepted and paid for, the oral agreement is enforceable for the portion actually delivered and accepted.
Contracts Lasting More Than One Year
Any agreement that cannot possibly be completed within one year from the date it is made must be in writing. The key word is “cannot.” If there is any theoretical way the contract could be performed within a year, even if that outcome is unlikely, the writing requirement does not apply. An at-will employment arrangement, for example, does not need to be written because either side can end it at any time. Multi-year service contracts, installment payment plans stretching beyond 12 months, and similar long-term deals all fall inside the rule.
Exceptions to the Writing Requirement
Texas courts recognize limited exceptions that can rescue an unwritten agreement. The most common is partial performance: if a buyer of real property has paid part of the price, taken possession, and improved the land, a court may enforce the oral deal because those actions make the agreement’s existence hard to deny. Courts weigh these cases individually, so relying on the exception is a gamble.
Promissory estoppel offers another path. If one party made a clear promise, the other party reasonably relied on it to their detriment, and the promisor could have foreseen that reliance, a court may enforce the promise without a writing. Texas courts apply the doctrine cautiously, and it rarely succeeds as a standalone theory against the Statute of Frauds.
Non-Compete Agreements
Texas governs non-compete clauses through the Covenants Not to Compete Act in Business and Commerce Code Section 15.50. A non-compete is enforceable only if it is tied to an otherwise valid agreement and contains reasonable limits on time, geography, and the scope of restricted activity. The restrictions cannot impose a greater restraint than is necessary to protect a legitimate business interest such as trade secrets, confidential client information, or specialized training the employer provided.4Justia. Texas Business and Commerce Code Section 15.50 – Criteria for Enforceability of Covenants Not to Compete
Blocking a former employee from competing is not enough on its own. The employer has to show the restriction protects a specific, identifiable interest. Geographic limits should match where the company actually operates. Activity restrictions should track what the employee actually did, not sweep in an entire industry. Courts generally find restrictions of one to two years reasonable for most employees; longer periods may hold up for executives or people with access to highly sensitive information, but the employer has to justify the extended term.
When a non-compete is overly broad, Texas courts do not simply throw it out. Section 15.51 requires the court to reform the agreement, narrowing the time, geography, or scope to whatever is reasonable, and then enforce the rewritten version.5State of Texas. Texas Business and Commerce Code Bus and Com 15.51 The catch for employers: if a court reforms the agreement, the remedy is limited to injunctive relief. No damages can be awarded for a breach that happened before the court rewrote the clause.
Consumer Contracts and the DTPA
The Deceptive Trade Practices-Consumer Protection Act, in Business and Commerce Code Section 17.41 and following, gives Texas consumers a strong tool when a business uses deceptive tactics to induce or carry out a contract. The DTPA covers transactions involving goods, services, and real property.
A consumer can bring a DTPA claim when a false, misleading, or deceptive act caused them economic harm. That includes false advertising, failing to disclose information the consumer would consider important, making baseless warranty claims, or engaging in unconscionable conduct. In real estate, a common example is a seller who knows about foundation problems or flooding history and says nothing.6State of Texas. Texas Business and Commerce Code Section 17.50 – Relief for Consumers
A prevailing consumer always recovers economic damages plus court costs and reasonable attorney fees. If the defendant’s conduct was “knowing,” the consumer can also recover mental anguish damages and up to three times economic damages. If the conduct was “intentional,” the multiplier applies to the combined total of economic and mental anguish damages. The line between knowing and intentional often decides the size of the recovery.
Before filing a DTPA lawsuit, you must send the business a written notice at least 60 days in advance describing the complaint in reasonable detail and specifying the economic damages, mental anguish damages, and attorney fees you have incurred.7State of Texas. Texas Business and Commerce Code Bus and Com 17.505 – Notice Skip it, and the defendant can file a plea in abatement that pauses the case until you comply. The one exception: if the statute of limitations is about to expire, you can file immediately, but the defendant then has 60 days after being served to make a settlement offer.
Required Disclosures in Specific Contracts
Several Texas statutes require sellers and service providers to give buyers specific information at or before the time of sale. Missing these disclosures can unwind a deal or expose the seller to liability.
Residential Real Estate
Property Code Section 5.008 requires sellers of single-unit residential property to give the buyer a written Seller’s Disclosure Notice covering the working status of appliances and major systems, known defects in structural components like the foundation, walls, and roof, and environmental issues including flood history, asbestos, lead paint, and hazardous materials.8State of Texas. Texas Property Code Section 5.008 – Seller’s Disclosure of Property Condition The notice must be delivered before the effective date of the purchase contract. If the seller fails to deliver it in time, the buyer has seven days after receiving the notice to terminate the contract for any reason. Several transactions are exempt, including foreclosure sales, transfers by fiduciaries administering estates or trusts, transfers between co-owners, and sales of new construction that has never been occupied.
Door-to-Door Sales
Chapter 601 of the Business and Commerce Code governs cancellation rights for certain sales made outside a merchant’s normal place of business. If a salesperson comes to your home and you agree to buy more than $25 in goods or services, or more than $100 in real estate, you have until midnight of the third business day after signing to cancel.9Office of the Attorney General. Door-to-Door Sales and 3-Day Right of Rescission The merchant must give you a contract or receipt showing the sale date, the merchant’s name and address, and a statement of your right to cancel with the address for sending a cancellation notice. This right applies only to solicited transactions outside the merchant’s normal place of business. It does not apply to purchases you make at a store, online, or by phone.10Texas State Law Library. Do I Have 3 Days to Return a Purchase or Cancel a Contract in Texas
Motor Vehicle Sales
Occupations Code Section 2301.651 requires motor vehicle dealers to disclose prior wreck damage and salvage title status. The Texas Department of Motor Vehicles enforces the requirement through a disciplinary matrix that begins with fines and can reach license revocation for repeated failures.11TxDMV.gov. Enforcement Motor Vehicle Dealers Disciplinary Matrix
Electronic Signatures
Texas adopted the Uniform Electronic Transactions Act as Chapter 322 of the Business and Commerce Code, and federal law backs electronic contracting through the Electronic Signatures in Global and National Commerce Act. Under both laws, a contract or signature cannot be denied legal effect solely because it is electronic.12Office of the Law Revision Counsel. Electronic Signatures in Global and National Commerce An electronic signature is any electronic sound, symbol, or process attached to a record and adopted with the intent to sign. Clicking “I agree,” typing your name in a signature block, or using a digital signing platform all qualify.
When a contract requires a consumer to receive information electronically rather than on paper, the consumer must affirmatively consent, get clear notice of the right to request a paper copy, be told how to withdraw consent, and be given the hardware and software requirements for accessing the electronic records before agreeing. An electronic contract still has to satisfy every other requirement in Texas law, including the Statute of Frauds where it applies.
What Happens When a Contract Is Broken
When someone breaks a contract in Texas, the injured party can sue for breach. The court looks at three things: whether a valid contract existed, whether one party failed to perform, and whether that failure caused measurable harm. You need clear evidence of the contract’s terms and the losses you suffered.
Compensatory damages cover your actual financial losses. Consequential damages go further, compensating for foreseeable harm that flows from the breach even if it is not a direct cost of the failed contract itself. If a supplier’s failure to deliver materials causes you to lose a construction contract with a third party, those lost profits may qualify.
For contracts involving unique property or goods that cannot be replaced through the market, courts may order specific performance, which forces the breaching party to actually do what they promised. This remedy shows up most often in real estate, where every parcel is treated as unique. Liquidated damages clauses, which set a predetermined penalty for breach, are enforceable as long as the amount is a reasonable estimate of anticipated losses rather than a punishment.
Force Majeure
Many Texas contracts include force majeure clauses that excuse performance when extraordinary events prevent a party from fulfilling their obligations. Fires, floods, and severe storms can trigger these provisions. The event has to actually prevent performance, not merely make it more expensive. Courts refuse to excuse performance based on economic hardship alone, because business downturns are a normal risk of commerce. Courts also read the specific language closely; a vague force majeure provision may not protect you when you need it.
Your Duty to Limit Losses
If someone breaches a contract with you, Texas law expects you to take reasonable steps to minimize your losses. You cannot let damages pile up and then bill the breaching party for the full amount. If a supplier fails to deliver, you need to look for a replacement at a reasonable price. Damages you could have avoided through ordinary diligence are not recoverable.
Recovering Attorney Fees
Texas breaks from the general American rule that each side pays its own lawyer. Under Civil Practice and Remedies Code Section 38.001, a person who prevails on a claim for breach of an oral or written contract may recover reasonable attorney fees on top of damages.13State of Texas. Texas Civil Practice and Remedies Code Section 38.001 – Recovery of Attorney’s Fees The statute also covers claims for services rendered, labor performed, and materials furnished.
Fee-shifting changes the economics of contract litigation. A party considering whether to fight a $20,000 breach claim has to factor in not just the claim itself but the possibility of paying the other side’s legal bills too. The DTPA has its own fee-shifting rule: every prevailing consumer is entitled to court costs and reasonable attorney fees regardless of whether the defendant’s conduct was knowing or intentional.6State of Texas. Texas Business and Commerce Code Section 17.50 – Relief for Consumers But if a court finds the consumer’s lawsuit was groundless or brought in bad faith, the defendant recovers fees instead.
How Long You Have to Sue
Texas gives you four years to file most breach of contract lawsuits. For general contract claims, the clock starts when the breach occurs under Civil Practice and Remedies Code Section 16.004. For sales of goods under the UCC, Business and Commerce Code Section 2.725 also sets a four-year window, and the parties can agree in the contract to shorten it to as little as one year, though they cannot extend it.14Texas Public Law. Texas Business and Commerce Code Section 2.725 – Statute of Limitations in Contracts for Sale
For goods, the cause of action accrues when the breach happens, not when you discover it. The exception: if a warranty explicitly covers future performance, the clock does not start until you discover or should have discovered the breach. Missing the four-year deadline almost always kills the claim, so if you suspect a breach, talk to a lawyer sooner rather than later.