Thursday, August 13, 2009

Validity of Business Contracts in Texas

Parties form a binding contract when the following elements are present:

(1) an offer,
(2) an acceptance in strict compliance with the terms of the offer,
(3) a meeting of the minds,
(4) each party's consent to the terms, and
(5) execution and delivery of the contract with the intent that it be mutual and binding.

Am. Nat'l Ins. Co. v. Warnock, 114 S.W.2d 1161, 1164 (Tex. 1938); Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.--Houston [1st Dist.] 2002, pet. denied).

To be enforceable, the contract must be sufficiently certain to enable a court to determine the rights and responsibilities of the respective parties. See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992); America's Favorite Chicken v. Samaras, 929 S.W.2d 617, 622 (Tex. App.--San Antonio 1996, writ denied).

Under settled principles of contract interpretation, Texas courts construe a contract as a matter of law to determine whether it can be enforced as written without resorting to parol evidence. What this means is that Texas courts will look to the substance of the contract within the document itself without having to resort to extraneous or outside verbal evidence. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). The court's primary concern is to ascertain the intent of the parties, as expressed in the contract instrument. Id. (citing R.P. Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980)).

Frequently business owners draw up contracts that may be poorly written, or does not incorporate all the necessary terms and elements to make the contract legally enforceable. There are many contract templates available these days on the web or on form templates. However, each transaction is unique, and it is a better practice to for a business owner to hire a contract or business lawyer to draw up a good written contract in order to avoid future disputes or business litigation.

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