Oral Contract for Real Estate Purchase Can Be Enforceable
The general rule in Texas is that contracts for the sale of real estate must be in writing and signed by the parties in order to be enforceable. This notion, commonly known as the “Statute of Frauds,” is embodied in TEX. BUS. & COM. CODE § 26.01(a) and (b)(4) which state as follows:
Sec. 26.01. PROMISE OR AGREEMENT MUST BE IN WRITING. (a) A promise or agreement described in Subsection (b) of this section is not enforceable unless the promise or agreement, or a memorandum of it, is
(1) in writing; and
(2) signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him.
(b) Subsection (a) of this section applies to:
(4) a contract for the sale of real estate;
Similarly, Section 5.072 of the Texas Property Code, which addresses contracts for deed, provides that an “executory contract is not enforceable unless the contract is in writing and signed by the party to be bound or by that party’s authorized representative.” TEX. PROP. CODE § 5.072(a).
Statutes of Frauds are common concepts in the law. It makes sense that important agreements should be in writing.
In the absence of a writing setting forth the deal points in detail, then the chaos of “he said, she said” prevails. When this happens, Courts are left with often controverted and unreliable circumstantial evidence of the parties’ agreements. Where real estate is concerned, swearing matches can be disastrous and lead to unjust results.
“PARTIAL PERFORMANCE” EXCEPTION
Under Texas law, Statutes of Fraud pertaining to real estate are not absolute. The principle giving rise to the exception is grounded in “equity,” or the interests of “justice.”
In Texas, an oral contract for the sale of real estate may be removed from the statute of frauds when the parties have performed the contract to such a degree that application of the statute would defeat its true purpose. See Zaragoza v. Jessen, 511 S.W.3d 816, 822-23, 2016 WL 3194769, at *4 (Tex.App.-El Paso June 8, 2016, no pet.) (citing Carmack v. Beltway Dev. Co., 701 S.W.2d 37, 40 (Tex.App.-Dallas 1985, no writ)
“Under this exception, contracts that have been partly performed, but do not meet the requirements of the statute of frauds, may be enforced in equity if denial of enforcement would amount to a virtual fraud in the sense that the party acting in reliance on the contract has suffered a substantial detriment, for which he has no adequate remedy, and the other party, if permitted to plead the statute, would reap an unearned benefit.”)).
In accordance with this doctrine, an oral contract for the purchase of real property is enforceable if the purchaser:
- pays the consideration;
- takes possession of the property; and
- makes permanent and valuable improvements on the property with the consent of the seller, or, without such improvements, other facts are shown that would make the transaction a fraud on the purchaser if the oral contract were not enforced.
See Boyert v. Tauber, 834 S.W.2d 60, 63 (Tex. 1992) (citing Hooks v. Bridgewater, 111 Tex. 122, 127, 229 S.W. 1114, 1116 (1921)); see also Ratsavong v. Menevilay, 176 S.W.3d 661, 667-69 (Tex.App.-El Paso 2005, pet. denied) (requiring a showing of “valuable and permanent improvements”).
JURY DECIDES FACT ISSUE OF WHETHER EXCEPTION APPLIES
Notably, it is up to a JURY (and not a JUDGE) to decide whether an agreement falls within the partial-performance exception to the statute of frauds. See Blackstone Med., Inc.,470 S.W.3d at 647 (whether the circumstances of a particular case fall within an exception to the statute of frauds is generally a question of fact for the jury to resolve). For this reason, the issue of whether an exception to the statute of frauds applies cannot usually be determined by summary judgment.