We often have clients come to visit us with legal troubles who shake their heads and say, “I KNEW I should have gotten that in writing!”
In some situations, having a contract isn’t just a good idea, it’s a legal necessity! Under the law in Texas, and in many other states as well, there are some agreements that must be in writing in order to be enforceable. This law is called the “Statute of Frauds” and it states that certain promises must be in writing and signed by the person who is “charged” with keeping the promise.
The two most common “statute of frauds” problems that we see in our office involve one of the following two situations:
1. Real estate
2. Promise to pay debt
Under the law, a contract for a sale of real estate must be in writing to be enforceable. A lease of real estate for a term longer than one year must also be in writing. In situations where the parties know each other well, especially as family or friends, it is sometimes tempting to skip the formalities. However, doing so can leave the situation open for dispute and can leave one or both parties in a vulnerable position.
In cases where someone promises to pay the debt of another, the lender (again, often a family member, friend, co-worker or employer) is vulnerable to being left with a debt that s/he cannot collect. For instance, a woman offers to lend some money to her boyfriend’s 29 year old son, who needs it for a move that he is making. Her boyfriend promises to pay her back, and she trusts him, but they break up before that happens. She cannot enforce the debt against her ex-boyfriend and most likely will be out of luck in collecting from his son as well.
The law also contains a provision that says that any agreement which is not to be performed within one year from the date of making the agreement must be in writing. This applies to all types of situations.
Although not every situation needs a formal contract, there are some which certainly do. Other provisions in this law involve the executor/ administrator of an estate agreeing to be responsible for certain payments from his own funds, promises involving marriage or cohabitation, payment of certain commissions, and warranty of cure or results by a health care provider.
Sometimes people feel that they are being “too picky” or look like they are not “trusting” when they ask for something to be reduced to writing. A non-threatening way to ask someone to sign a contract or memorandum is to say, “let’s just make sure we are all on the same page”, or “let’s get this in writing so we will both be sure of what we agreed to do later on”, or “ in case something happens to one of us, lets make sure that (our children, spouses, employees, etc.) will understand what we were doing”.
For transactions in which there is a lot at stake (finances, security, time to be spent, relationships) it is important to know where everyone stands. Having a consult with a contract attorney (or real estate attorney when appropriate) can help save time and money in the long run.
