The Statute of Frauds: Why Real Estate Deals Must Be in Writing in Texas

What the statute says

Business and Commerce Code § 26.01(a) provides that a promise or agreement described in subsection (b) is not enforceable unless the promise or agreement, or a memorandum of it, is in writing and signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for that person. Subsection (b) lists the covered agreements. Two of them govern real estate directly: § 26.01(b)(4), a contract for the sale of real estate, and § 26.01(b)(5), a lease of real estate for a term longer than one year. Two others appear constantly in real estate disputes: § 26.01(b)(2), a promise to answer for the debt of another, which covers guaranties, and § 26.01(b)(6), an agreement that cannot be performed within one year of its making.

Real estate brokers have their own, stricter version in Occupations Code § 1101.806, which bars any suit for a commission without a signed writing, discussed in commission disputes with a commercial real estate broker.

What counts as a contract for the sale of real estate

More than a deed. Texas courts apply § 26.01(b)(4) to earnest money contracts, options to purchase, rights of first refusal, contracts to convey an easement or mineral interest, agreements to partition land between co-owners, and promises to convey land as part of a larger deal, such as a partner's promise to contribute a tract to a venture. An oral agreement to sell a building, however detailed and however many witnesses heard it, is unenforceable against a party who did not sign a writing.

A lease of one year or less may be oral. A lease longer than one year must be in writing under § 26.01(b)(5), and so must a renewal or extension that carries the term past a year, and an option to renew that is itself part of the lease. A tenant occupying under an oral lease for a longer term is generally treated as a tenant for a shorter period that the statute allows, with rent paid and accepted setting the period.

What the writing must contain

The statute says writing and signature; the courts have filled in the rest. Texas courts require the writing to contain the essential terms of the agreement, and for real estate that means at least the parties, the property, the price or consideration, and the promise to sell or lease. The signature need only be that of the party against whom enforcement is sought, so a contract signed by the seller alone can be enforced against the seller.

The property description is where most writings fail. Texas courts require that the writing furnish within itself, or by reference to some other existing writing, the means or data by which the land can be identified with reasonable certainty. A legal description or a reference to a recorded deed satisfies it. A street address often does, when the property is a single identified tract. A description such as the 20 acres on the north side of the farm, or my lot on Main Street when the seller owns three, does not. Parol evidence can explain a description but cannot supply one.

The writing need not be a single document. Several writings that refer to one another, such as a signed letter of intent and the term sheet it incorporates, can be read together. Emails and text messages can satisfy the statute when the party to be charged sent them and they contain the essential terms, and the Texas Uniform Electronic Transactions Act treats an electronic signature as satisfying a signature requirement; the details are in whether emails and text messages can form a binding contract in Texas. The usual fight over email chains is not the medium but whether the parties had finished negotiating or intended a formal contract to follow.

The partial performance exception

Texas courts enforce an oral agreement for the sale of real estate when the party seeking enforcement has partially performed in a way that would make it a fraud to let the other side hide behind the statute. The traditional showing is three things: payment of the consideration, possession of the property by the buyer, and permanent and valuable improvements made by the buyer with the seller's consent, or, without improvements, other facts that would make the transaction a fraud on the buyer if the agreement were not enforced. The performance must be unequivocally referable to the agreement, meaning the acts make sense only if the claimed contract exists. Payment alone is not enough, because money can be returned. Possession alone is not enough, because a tenant also possesses. Improvements carry the most weight.

The exception is an equitable one and is applied cautiously. A buyer who paid a deposit, moved equipment in and started renovating under an oral deal may have a case; a buyer who paid a deposit and waited does not. The exception is also available to the seller in limited circumstances, and it does not rescue a broker's commission claim, which § 1101.806 bars regardless.

Promissory estoppel and other exceptions

Promissory estoppel can defeat the statute only in a narrow form: where the defendant promised to sign a written agreement that already existed and that itself satisfied the statute, and the plaintiff relied on that promise. A general promise to sell someday, or to put something in writing later, does not qualify. Texas courts also allow a party who has fully performed an oral agreement that the other side has accepted to recover the value of what it conveyed, and a party who paid money under an unenforceable oral contract may recover it in restitution. What the statute prevents is enforcement of the promise to convey, not every claim arising from the dealings.

Example

Suppose the owner of two adjoining lots in Oak Cliff tells a neighboring restaurant operator over coffee that she will sell him the vacant lot for use as a patio and parking, names a price, and shakes on it. The operator sends a text thanking her and confirming the price; she replies thumbs up. He pays a deposit by check noted deposit on lot, fences the lot, pours a concrete pad and installs lighting at substantial cost over the next four months while she watches. She then receives a higher offer and refuses to close. The text exchange may be a signed writing, but it does not identify which of her two lots is being sold, so the statute is not satisfied on the writing alone. The operator's partial performance claim is strong: payment referable to the deal, exclusive possession and permanent improvements made with her knowledge. A court can order her to convey the lot or award damages. Had he merely paid the deposit and waited, he would recover the deposit and nothing more. The buyer's remedy of compelled conveyance is covered in forcing a real estate sale to close.

Modifications, extensions and waivers

A modification of a contract within the statute must itself satisfy the statute if it changes a term the statute protects, such as the price, the property or the parties. Texas courts have treated oral agreements to extend the time for performance differently in different settings, so a party relying on an oral extension of a closing date should get it in writing before the original date passes. A party that lets the other side rely on an oral extension may be estopped from enforcing the original deadline, but that is a fact question decided after the fact, which is exactly what the writing requirement exists to avoid.

How the statute is raised

The statute of frauds makes a contract unenforceable, not void. It is an affirmative defense that the defendant must plead, and a party who fails to raise it can be held to an oral deal. The plaintiff then bears the burden of proving an exception. Because the issue is often decided on the documents, statute of frauds disputes are frequently resolved by summary judgment early in the case, which makes the content of the writings the single most important fact in the file.

What to do now

• Collect every writing: letters of intent, term sheets, emails, texts, checks and their memo lines, and any document the other side signed.
• Check the property description in those writings against the deed records. If no writing identifies the land, the case depends on partial performance.
• Document any possession, payments and improvements with dates, invoices and photographs.
• Do not pay more, build more or take possession on an oral promise while the question is open; the acts that create an exception are also the acts that create exposure if the deal fails.

Tina Wysk represents buyers, sellers, landlords and tenants in contract enforcement disputes over Texas real estate through the firm's real estate litigation practice.