Statute of Frauds in Texas Real Estate

Introduction

This article addresses the requirement that agreements relating to real property be in writing, a requirement known generically as the Statute of Frauds. A critical application of the Statute of Frauds occurs when describing the property to be conveyed. A contract “must furnish within itself, or by reference to some other existing writing, the means or data by which the property to be conveyed may be identified with reasonable certainty.” If a contract does not meet this standard it is unenforceable under the Statute of Frauds. Long Trusts v. Griffin, 222 S.W.3d 412 (Tex. 2006).

Statute of Frauds issues often arise in connection with oral modifications, amendments, and extensions of a written contract. As an example, a lawyer may be asked if a handshake agreement to add thirty days to a designated closing date is binding. Generally, the answer is no, but there may be exceptions.

Law Applicable to the Statute of Frauds

Provisions of the Statute of Frauds applicable to real estate are found in Business & Commerce Code Sections 26.01 and 26.02(b):

Bus. & Com. Code 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:

(1) a promise by an executor or administrator to answer out of his own estate for any debt or damage due from his testator or intestate;

(2) a promise by one person to answer for the debt, default, or miscarriage of another person;

(3) an agreement made on consideration of marriage or on consideration of nonmarital conjugal cohabitation;

(4) a contract for the sale of real estate;

(5) a lease of real estate for a term longer than one year;

(6) an agreement which is not to be performed within one year from the date of making the agreement. . . .

Bus. & Com. Code Sec. 26.02. Loan Agreement Must be in Writing

(a) A loan agreement in which the amount involved in the loan agreement exceeds $50,000 in value is not enforceable unless the agreement is in writing and signed by the party to be bound or by that party’s authorized representative.

Section 26.02(b) is particularly important when those seeking loan modifications find themselves unwittingly foreclosed upon despite an alleged oral agreement with the lender. These unfortunate homeowners likely have no recourse unless a written modification or reinstatement agreement was signed before the foreclosure sale.

Additional Statute of Frauds provisions are found in Business & Commerce Code Section 2.201 but these apply to the sale of goods, not real estate.

Although not labeled as such, there is another important Statute of Frauds in Texas, Property Code Section 5.021, which is sometimes referred to as the Statute of Conveyances:

Prop. Code Sec. 5.021. Instrument of Conveyance

A conveyance of an estate of inheritance, a freehold, or an estate for more than one year, in land and tenements, must be in writing and must be subscribed and delivered by the conveyor or by the conveyor’s agent authorized in writing.

How detailed must the written agreement be?

What does the statute of frauds require of a contract at a practical level? How complete must the written document actually be? “The statute of frauds requires that a memorandum of an agreement, in addition to being signed by the party to be charged, must be complete within itself in every material detail and contain all of the essential elements of the agreement so that the contract can be ascertained from the writings without resorting to oral testimony.” Sterrett v. Jacobs, 118 S.W.3d 877, 879-80 (Tex.App.—Texarkana 2003, pet. denied). Note, however, that the contract need not be contained within the four corners of a single document. “A valid memorandum of the contract may consist of numerous communiques [or emails] signed by the party to be charged. . . .” Key v. Pierce, 8 S.W.3d 704, 708 (Tex.App.—Fort Worth 1999, pet. denied).

“It has long been understood that to satisfy the statute of frauds, there must be a written memorandum which is complete within itself in every material detail, and which contains all of the essential elements of the agreement, so that the contract can be ascertained from the writings without resorting to oral testimony. The required written memorandum need not always be a single document, however.” Copano Energy, LLC v. Bjunoch, 593 S.W.3d 721 (Tex. 2020).

Contracts for the Sale of Real Property

A 2020 court of appeals case does a comprehensive job of summing up the Statute of Frauds as it relates to real property contracts:

To be valid, a contract for the sale of real property must satisfy the statute of frauds; the contract must be in writing and signed by the person to be charged. Bus. & Com. Code Ann. Sec. 26.01(a), (b)(4); Prop. Code Ann. Sec. 5.021. Because the statute requires a signed writing, the knowledge and intent of the parties has no effect on the validity of the contract. . . . Even when ‘the record leaves little doubt that the parties knew and understood what property was intended to be conveyed . . . the knowledge and intent of the parties will not give validity to the contract and neither will a plat made from extrinsic evidence.

It is well settled that the writing must furnish within itself or by reference to other identified writings then in existence, the means or data by which the particular land to be conveyed may be identified with specific certainty. . . . Courts may construe multiple writings prepared for the same transaction as one contract. . . . However, any documents referred to and incorporated in the contested agreement must be in existence at the time the parties executed the contested agreement. . . . If the writing and other identified writings do not sufficiently describe the property to be conveyed, then the conveyance violates the state of frauds and is voidable. . . . A contract that fails to meet the requirements of the statute of frauds is not void but is merely voidable.

Dayston, LLC v. Brooke, 630 S.W.3d 220 (Tex.App.—Eastland 2020, no pet.).

Property Descriptions under the Statute of Frauds

A real estate contract must specifically and sufficiently describe the subject property. How is sufficient defined? A property description is sufficient if the writing furnishes within itself, or by reference to some other existing writing, the means or data by which the particular land to be conveyed may be identified with reasonable certainty. General Metal Fabricating Corp. v. Stergiou, 438 S.W.3d 737, 753 (Tex.App.—Houston [1st Dist.] 2014). This is Texas’ reasonable certainty standard, in effect since at least 1945.

Is a full and correct metes-and-bounds description always required? No. “For an instrument that purports to convey a property interest, the sufficiency of the legal description is a question of law. To meet the Statute of Frauds specificity requirement, a property description is sufficient if the writing furnishes with itself, or by reference to some other existing writing, the means or data by which the particular land to be conveyed may be identified with reasonable certainty. . . . Parol [oral] evidence is admitted to explain the descriptive words and to identify the land, where the instrument contains the ‘nucleus’ of description. . . . If enough appears in the description (as explained, if necessary, by the parol evidence) so that a party familiar with the locality can identify the premises with reasonable certainty, it will be sufficient.” WK Properties, Inc. v. Perrin SA Plaza, LLC, 648 S.W.3d 513 (Tex.App.—San Antonion 2021, no pet.).

“Although the writing does not have to list metes and bounds, it must furnish data that identifies the property with reasonable certainty. . . . The description must typically furnish enough information to locate the general area . . . by tract survey and county, [and] it need contain information regarding the size, shape, and boundaries. . . . When it is possible that more than one tract of land fits the description, the statute of frauds is not satisfied. For example, an unidentified portion of a larger tract is insufficient.” Dayston, LLC v. Brooke, 630 S.W.3d 220 (Tex.App. —Eastland 2020, no pet.).

Multiple Documents Construed Together

What about situations where a contract makes references to other documents? Only in limited circumstances may such extrinsic evidence be used and then “only for the purpose of identifying the [property] with reasonable certainty from the data in the [written contract].” Pick v. Bartel, 659 S.W.2d 636, 637 (Tex. 1983), “The written memorandum, however, need not be contained in one document.” Padilla v. LaFrance, 907 S.W.2d 454, 460 (Tex. 1995) (citing Adams v. Abbott, 254 S.W.2d 78, 80 (Tex. 1952)). The Texas Supreme Court has repeatedly held that multiple writings pertaining to the same transaction will be construed as one contract. Owen v. Hendricks, 433 S.W.2d 164 (Tex. 1968); Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000).

Mineral Interests and Easements

Oil, gas, and other mineral interests “constitute real property; therefore, an agreement for the transfer or assignment of a mineral interest must comply with the Statute of Frauds.” Anderson Energy Corporation v. Dominion Oklahoma Texas Exploration & Production, Inc., 469 S.W.3d 280 (Tex.App.—San Antonio 2015, no pet.).

Easements are real property interests subject to the Statute of Frauds, even if their location and terms of use are less than clear. “If an easement, though uncertain, is susceptible to a reasonable construction as to its true intent and meaning, the easement satisfies the Statute of Frauds. Fuqua v. Oncor Elec. Delivery Co., 315 S.W.3d 552 (Tex.App—Eastland 2010, pet. denied).

Exceptions to the Statute of Frauds

A discussion of the requirement of a signed writing would not be complete without addressing the equitable exceptions. Equity is that branch of the law which provides relief in cases where strict application of a statute or common-law rule would result in unfairness or injustice. In the case of the Statute of Frauds, the following exceptions apply:

(1) when enforcement of the Statute of Frauds would itself amount to an actual fraud (but not a mere wrong);

(2) when the doctrine of promissory estoppel applies, the three elements of which are (a) a person makes a promise that he or she should have expected would lead another person to sustain some definite and substantial damage or injury; (b) such damage or injury occurred; and(c) the court must act to relieve or avoid the damage or injury; or

(3) when significant partial performance of an oral agreement has occurred and denying enforcement of the agreement at that point would amount to an actual fraud.

Exceptions to the Statute of Frauds are not found in the Property Code but in case law. Their use is strictly limited since widespread allowance of exceptions would effectively void the rule and could result in uncertainty in real estate transactions. See Nagle v. Nagle, 633 S.W.2d 796, 799-800 (Tex. 1982); Birenbaum v. Option Care, Inc., 971 S.W.2d 497, 503 (Tex.App.—Dallas 1997, pet. denied); Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429, 438 (Tex.App.—Dallas 2002, pet. denied).

The Old Rule is Still the Rule

An early but still valid case lays out the circumstances where a real property conveyance may be enforced in spite of failing to comply with the Statute of Frauds: “From an early time it has been the rule of this Court, steadily adhered to, that to relieve a parol [oral] sale of land from the operation of the Statute of Frauds, three things were necessary: (1) payment of the consideration, whether it be in money or services; (2) possession by the vendee; and (3) the making by the vendee of valuable and permanent improvements upon the land with the consent of the vendor; or, without such improvements, the presence of such facts as would make the transaction a fraud upon the purchaser if it were not enforced. Payment of the consideration, though it be a payment in full, is not sufficient. . . . Each of these three elements is indispensable, and they must all exist.” Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114, 1116 (1921).

The Statute of Frauds is such a powerful rule in Texas that paying for the property is not sufficient (by itself) to claim it.

Oral Contracts for Deed

The classic situation in this area is the oral contract for deed, something that still happens in rural Texas. The buyer claims that he was purchasing the property, the seller claims that it was merely a lease. Matters come to a head when the seller treats the buyer as an ordinary tenant and attempts to evict. Unfortunately for the buyer in such cases, the rule in Hooks is strictly enforced. Jennifer Yarto & DTRJ Invs., L.P. v. Gilliland, 287 S.W.3d 83, 94 (Tex. App.—Corpus Christi 2009).

The Partial Performance Exception

Circumstances constituting partial performance are particularly common in the case law. “Under the partial performance exception to the statute of frauds, 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.” Hairston v. SMU, 441 S.W.3d 327, 336 (Tex.App.—Dallas 2013, pet. denied).

A Texarkana case involving an oral agreement to take over payments provides an excellent summary of the specific items required for the partial performance exception to apply:

In order to establish the partial performance exception, [the buyers asserting the exception] had to show that (1) they had performed acts unequivocally referable to the agreement; (2) that the acts were performed in reliance on the agreement; (3) that as a result of the acts they had experienced substantial detriment; (4) that they have no adequate remedy for their loss; and (5) that [the seller] would reap an unearned benefit such that not enforcing the agreement would amount to a virtual fraud.” Thomas v. Miller, 500 S.W.3d 601 (Tex.App.—Texarkana 2016, no pet.).

In Thomas, the seller tried to convey the property to someone else after the buyers had been making the mortgage payments for an extended period—and the court declined to let him get away with it.

Trusts and the Statute of Frauds

There is a statute of frauds that pertains to trusts that is found in Property Code Section 112.004: “A trust in either real or personal property is enforceable only if there is written evidence of the trust’s terms bearing the signature of the settlor or the settlor’s authorized agent.” Accordingly, the common (but careless) practice of showing a trust as grantee in a deed, without an underlying written trust agreement, is insufficient as a matter of statute.

Occurrence of Statute of Frauds Issues

Lawyers tend to encounter Statute of Frauds issues in two contexts: first, when a client inquires whether or not a certain oral agreement is legally enforceable; and second, in litigation, when a plaintiff seeks to enforce an oral agreement and the Statute of Frauds is raised by the defendant as an affirmative defense.

When the Statute of Frauds is raised as a defense, the burden of proof shifts back to the plaintiff to demonstrate how one of the exceptions would apply—a difficult task, inasmuch as these exceptions are narrowly construed.

Alleged subsequent oral modifications are a particularly common issue for attorneys. “Generally, if a contract falls within the statute of frauds, then a party cannot enforce any subsequent oral material modification to the contract.” SP Terrace, L.P. v. Meritage Homes, 334 S.W.3d 275,282 (Tex.App.—Houston [1st Dist.] 2010, no pet.).

The strictness of the Statute of Frauds in Texas is demonstrated in a Fifth Circuit case where the court denied enforcement of a written contract merely because exhibits to the contract (describing oil and gas leases to be conveyed) had not been finalized. See Preston Exploration Co. v. PEC P’ship, 669 F.3d 518 (5th Cir. 2012). On the other hand, a Texas appeals court concluded that the failure of one party to sign a lease did not cause the lease to fail under the Statute of Frauds. Thomas P. Sibley, P.C. v. Brentwood Inv.Dev.Co., 356 S.W.3d 659 (Tex. App.—El Paso 2011, pet. denied).

Get it in Writing

Get it in writing is not just valid folk wisdom, it is a baseline of Texas law when it comes to the purchase and sale of real property. There are limited exceptions that are narrowly construed. A proper contract is best, but even an informal scribbling signed by the parties can be sufficient depending on the circumstances.