Real Estate Business Issues: Statute of Frauds

In the world of real estate, contracts are the cornerstone of transactions. They delineate the terms and conditions agreed upon by the involved parties, providing a framework for the exchange of property. However, not all agreements are created equal, and in Texas, the Statute of Frauds plays a pivotal role in determining which contracts are legally enforceable.

The Statute of Frauds is a legal doctrine that requires certain types of contracts to meet certain requirements to be enforceable. Under the Texas Business and Commerce Code § 26.01(b)(4), this doctrine explicitly applies to contracts for the sale of real estate; therefore, its implications are particularly significant in the realm of real estate transactions.

Necessary Elements of the Statute of Frauds for Real Estate in Texas

Understanding the nuances of the Statute of Frauds can help real estate professionals navigate complex transactions with confidence. By being aware of the exceptions and requirements outlined in Texas law, they can better protect their clients’ interests and safeguard the integrity of the transaction process. For a real estate transaction, there are two key elements to meet the requirements for the Statute of Frauds:

1. Writing Requirement. To satisfy the Statute of Frauds, the contract must be in writing and signed by the party against whom enforcement is sought. Additionally, the written agreement must contain the essential terms of the transaction, including the identities of the parties, a description of the property involved, the purchase price or terms of the lease, and any other material terms.
2. Signature Requirement. The agreement or promise to transfer real property ownership must be signed by the person who will transfer the property or by a person lawfully authorized to sign for them.
   1. Electronic Signature is sufficient as established by the Texas Uniform Electronic Transactions Act (TUETA) § 322.003.

Outside of the statutory requirements, it is important that the contract terms in itself must be enforceable. The assistance of legal counsel to review or create an agreement prior to signatures will be beneficial for future enforcement of a real estate agreement.

Exceptions

While the Statute of Frauds generally requires real estate contracts to be in writing and signed, there are certain exceptions recognized under Texas law. These exceptions include:

• • Promissory Estoppel. Oral agreements generally are unenforceable, but when the party selling the property (promisor) makes a promise that they should have expected would lead the buyer (promise) to some definite and substantial financial loss and such a financial loss occurred, the court must enforce the promise to avoid that financial burden. This exception only applies if the oral promise was to execute an agreement in existence that already complies with the Statute of Frauds. See Bank of Tex., N.A. v. Gaubert, 286 S.W.3d 546 (Tex.App.—Dallas, 2009).

• Partial Performance. This exception applies when an oral agreement has been partially performed and the denying of the enforcement would amount to fraud. The actions taken in the partial performance must be connected to and corroborate the alleged oral agreement, and they must be done in a manner that there is no other remedy than the completion of the alleged oral agreement’s performance. See Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429 (Tex.App.—Dallas, 2002).

• Admission. The oral agreement between two parties becomes enforceable when the breaching party admits the existence of the oral agreement. This can be found in the Texas Business and Commerce Code § 2.201.

There are other exceptions to the Statute of Frauds; however, due to the fact specific nature of these exceptions, it is imperative to seek the assistance of an attorney when determining whether these exceptions are applicable to your situation.

In conclusion, the Statute of Frauds serves as a fundamental principle in Texas real estate law, imposing strict requirements for the enforceability of agreements involving real property. However, exceptions such as promissory estoppel and partial performance may allow for enforcement of an otherwise unenforceable oral agreement. These principles should guide any real estate business transactions in Texas to ensure compliance with the law and enforceability of contracts.