Texas contract law is vitally important to every business operating in the state. Whether you have a startup in Austin, a small business in Dallas, or a thriving company in Houston, you’ll be held to the same contracts laws—and the terms you establish in the contracts you use. Whatever type of contract you need drafted or reviewed, Priori Legal's curated, on-demand marketplace can connect you with vetted attorneys tailored to your needs.
Essential Elements of Enforceable Contracts in Texas
Contract law in Texas is dependent upon valid, enforceable contracts. Every enforceable contract contains six essential elements:
Acceptance of that offer
A “meeting of the minds” or general agreement on the subject and terms of the contract
Communication that each party consented to the terms of the contract
Intention for the contract to be mutually binding, as shown by execution and delivery of the contract
Some kind of consideration or payment
Common Types of Contracts in Texas
Contract law is a wide field. While there are essential elements that must be present in order for a contract to be enforceable, each type of contract is unique in its structure and terminology, as well. The following are some of the most common types of contracts in Texas, as well as some specific terms and provisions that make each unique.
B2B ("business-to-business") contracts, generally for the purchase of goods and services, are among the most common contracts executed in Texas. These types of contracts are not generally bound to very many restrictions and courts will generally uphold any terms set in the contract. Businesses tend to use fairly complex and detailed contracts executed by experienced Texas contract lawyers to account for every element that could affect the agreement, because they know that Texas contract law is unlikely to invalidate an agreement without clear reason. Unless the entire agreement is illegal, Texas courts will usually enforce as much of a B2B contract as is valid.
Real Estate Contracts
Almost all real estate contracts in Texas are based on the standard forms issued by the Texas Real Estate Commission. These standard forms are meant to protect consumers and account for all the most important elements in a sale of real estate in the state. If you are buying or selling property, you still may want to solicit the help of a real estate lawyer when drafting the contract, as the choice of version and added terms can greatly impact vital elements like payment and transfer of title.
While often quite similar to B2B contracts, consumer contracts are somewhat more limited by the law. That’s because consumer protection laws established at the state and federal level prevent companies from taking advantage of customers’ lack of legal knowledge. Texas requires consumer contract to meet a higher standard of “reasonableness.” This means pricing and other terms can’t be overly skewed in favor of the company and that some common causes in B2B contracts, such as acceleration clauses and non-litigation clauses, are prohibited. The list of the most important prohibited practices can be found on the Texas Attorney General’s website.
Breach of Contract Under Texas Contract Law
When two parties enter into a contract in Texas, the assumption is that each one will follow through on their end of the agreement. Unfortunately, this doesn’t always happen. If a party to a contract fails to perform on their agreed duties, the other party has the right to sue for breach of contract.
What Is Considered a Breach of Contract in Texas?
A breach of contract claim in Texas requires four elements to be proven:
1. The parties have a valid, binding contract.
2. The plaintiff fulfilled their duties under the contract.
3. The defendant made a material breach of their duties under the contract
4. This breach caused the plaintiff to experience damages.
Remedies for breach of contracts in Texas are fairly standardized. The following are the most common remedies in Texas.
Rescission. The contract is canceled, all money is returned, and the matter is dropped as if it never happened. This is what most people think of as refunds. Rescission is most common in consumer contracts.
Damages. The party who made the breach is required to pay the wronged party for any measurable losses resulting from the breach. Real damages are the most common remedy in Texas contract law.
Punitive or Exemplary Damages. Under the Texas Deceptive Trade Practices Act, any breach of contract in bad faith or that results from illegal, fraudulent, or deceptive behavior is punishable beyond simply the losses a company incurred. These punitive damages can be up to two or three times the actual damages resulting from the breach.
Specific Performance. A court order can require each party to follow through with the initial agreement and perform as initially agreed.
Reformation. The contract is re-written or renegotiated to better suit the parties actual intentions and performance is reinitiated.
Attorneys’ Fees. The party that breached the contract must pay for the legal fees incurred by the wronged party who was forced to go to court to get the agreed-upon performance.
Are oral agreements considered enforceable contracts in Texas?
Yes. So long as there is an offer, acceptance, consideration, and basic established terms, oral agreements are just as enforceable as written contracts. Still, it is always better to get an agreement in writing, as it may be difficult to prove that an oral contract exists.
Are noncompete clauses enforceable in Texas?
Generally speaking, yes. While noncompete clauses are practically unenforceable in some states, courts in Texas have upheld covenants not to compete under most circumstances . So long as the noncompete is contained within a large enforceable agreement, the duration and geographical area is limited, and the scope of limited activity is “reasonable,” Texas noncompetes will generally stand. It’s important to keep in this in mind when signing or issuing a noncompete, and it may help to get this language reviewed by an experienced Texas contract lawyer in order to ensure a predictable outcome.