What Makes a Contract Legally Binding in Texas?
- The Spencer Law Firm
- Jul 5
- 3 min read
In the high-stakes world of Texas business, a handshake and a promise might feel right—but they won't always hold up in court. Every day, small business owners across the Lone Star State sign deals, hire vendors, or enter partnerships. But unless those agreements meet Texas' legal standards, they may not be worth the paper (or email) they're written on. Whether you're a seasoned entrepreneur or a new business owner, understanding what makes a contract legally binding in Texas is critical to protecting your business.
Here’s a clear, practical breakdown of the elements that turn everyday agreements into enforceable contracts under Texas law.
Offer and Acceptance: The Core of Every Deal
Every legally binding contract in Texas must begin with an offer from one party and an unambiguous acceptance from the other. For example:
You offer to buy 100 units of a product for $5,000.
The supplier agrees, without modifying the terms.
Mutual understanding (also called a "meeting of the minds") is essential. If one side thinks the deal includes installation and the other doesn’t, you don’t have a binding contract.
Consideration: Something of Value Must Be Exchanged
Texas courts require that each party give something of value. This could be:
Money
Goods or services
A promise to do (or not do) something
Free promises (without consideration) are not enforceable, even if written. For example, a promise to give someone $1,000 as a gift is not legally binding unless the recipient provides something in return.
Legal Purpose: No Shady Business
Contracts that involve illegal activity (e.g., selling banned substances or engaging in fraud) are automatically void. Your agreement must comply with state and federal laws.
Pro Tip: Even if a contract is 99% legitimate, a single illegal clause can void the whole agreement.
Capacity: All Parties Must Be Legally Competent
Under Texas law, all parties must be:
Over the age of 18 (with some exceptions)
Mentally competent
Not under duress or undue influence
Contracts signed by minors or individuals with mental impairments may not be enforceable.
Written vs. Oral Contracts: When Does It Matter?
Texas recognizes both oral and written contracts, but some must be in writing under the
Statute of Frauds, such as:
Real estate sales
Contracts taking more than a year to perform
Agreements for goods over $500 (under the UCC)
Written contracts are always safer and provide stronger evidence if disputes arise.
Real-World Case Study: The Vendor Who Walked Away
A Dallas bakery owner verbally agreed to hire a catering company for $10,000 worth of holiday orders. No written contract was signed. When the caterer failed to deliver, the bakery had no legal recourse. Why? No written agreement, no proof of terms, and no enforceable contract.
Moral of the story: Always get it in writing—especially when large sums or critical business functions are involved.
Enforceability: Red Flags That Can Invalidate a Contract
Even if all five key elements exist, a contract can still be voided if:
Terms are too vague or ambiguous
One party was misled or defrauded
The contract is unconscionable (extremely one-sided)
Make sure your contracts are clear, fair, and accurately reflect your understanding.
Need help drafting or reviewing a business contract in Texas?
The Spencer Law Firm specializes in helping small businesses protect their interests through strong, enforceable agreements. Reach out today to ensure your contracts are built to last.
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