A well-written contract that is signed by all parties concerned can’t be changed legally simply because of a verbal conversation. Right?
Incorrect! This is a common but false assumption.
In Texas and many other states, contracts that are modified orally are legal and binding even when there is a “no oral modification” (NOM) provision clearly stated in the written contract, except in cases that are protected by the Statutes of Frauds.
Consider this scenario. A company hires a construction contractor, and both sign a written contract. They build trust as the project gets underway and, when a hiccup arises, they simply talk about it and agree to handle it in a different manner than the contract specifies. Alas, an oral modification has taken place.
This doesn’t just happen with small companies. In Texas, such companies as Hobby Lobby, Montgomery County Hospital, and Exxon have been involved in cases regarding oral modifications.
Although there is no guarantee that oral modifications will stand up in every situation, Texas courts’ have concluded that “a written contract, not required by law to be in writing, may be modified by subsequent oral agreement, even if it provides that it can be modified only by a written agreement.” Hyatt Cheek Builders-Eng’rs Co. v. Bd. of Regents of Univ. of Tex. Sys., 607 S.W.2d 258, 265 (Tex. App.—Texarkana 1980, writ dism’d).
There are definite exceptions. The Statute of Frauds in Texas states clearly that the following contracts are not enforceable unless they are in writing and signed by the appropriate person:
- Real estate sales;
- Real estate leases that are for greater than one year;
- Commission agreements for sales or purchases related to oil, gas, and minerals;
- Sale of goods costing $500 or more per the Uniform Commercial Code;
- Agreements that take more than 12 months to accomplish from the date of the official agreement;
- Will or trust;
- Gas or oil mining lease;
- Agreement to answer for another’s debt or default;
- Securities’ sale;
- Healthcare provider’s agreement or warranty to cure related to medical care;
- Marriage agreement, not including common law marriage; and
- Guarantor’s written agreement or a surety to relieve another’s duty upon default.
So, do you really need a written contract?
Best practice? Absolutely!
- A well-written contract clearly defines the terms and obligations that each expects.
- There is no guarantee that a court will uphold any verbal changes to the original contract.
- It provides recognizable and binding terms so all parties can manage expectations and have the best possible chance of achieving their desired outcomes.
- It verifies the commitment of all parties.
- It provides manageable expectations.
- It provides standards against which performance can be measured.
At Ensley Benitez Law, PC, we are proud to help protect our clients by providing professional contracts. Regardless of exceptions, having a clearly written contract is still the best practice.
Karen Ensley, Partner, Board Certified Construction Law
Brian Benitez, Partner, Member, State Bar College
Ensley Benitez Law, PC
12222 Merit Dr, Ste 900, Dallas, Texas 75251
469-983-6500
karen@eblawtexas.com, brian@eblawtexas.com
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