Oral Contracts Aren't Worth the Paper They're Written On

The following post is based on the following case: Buxani v. Nussbaum, 940 S.W.2d 350 (Tex.App.-San Antonio, 1997)

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     The Buxanis, who owned a jewelry store, hired Nussbaum to remodel the shop.  The original contract contained a provision that any new work required written documentation.  During construction, the Buxanis asked Nussbaum to add additional modifications.  After informing the Buxanis of the additional cost -- which they agreed to pay -- Nussbaum did the work.  This second contract was never written.  When Nussbaum asked for payment, the Buxanis refused, forcing Nussbaum to sue.  Nussbaum won at trial; the court ruled the parties formed a second oral contract.

     The Buxanis appealed, arguing that the oral contract lacked mutual assent, one of 5 elements required in Texas for contract formation.[1]  The appellate court based their affirmation of the lower court’s ruling on the following doctrine:

When the court files findings of fact which include some elements but omit unrequested elements essential to a ground of recovery, the omitted findings will be presumed to have been found in support of the judgment if those presumed findings are supported by evidence in the statement of facts.”

The appellate court found the information in the trial record and ruled accordingly.

      While the appellate court’s reasoning was the simplest way to establish mutual assent, another existed that combines common law with trial testimony.  Texas law defines mutual assent[2] in the following manner: “To make a contract there must be a mutual assent. The assent must comprehend the whole of the proposition; it must be exactly equal to its extent and provisions, and it must not qualify them by any new matter.”[3]  And according to §19 of the Restatement of Contracts, conduct can prove a party’s assent.  Here, counsel could compare the totality of the work done with the written contract’s terms to show the content of the oral contract.  Nussbaum’s conduct that differed from that specified in the written contract would prove his acceptance of the new terms and conditions.

     But regardless of the legal jiu-jitsu to prove the oral contract at trial, a second written contract may have either prevented litigation completely or greatly reduced the cost of litigation by providing a document all parties could use to show the terms and conditions agreed to.  And as a practical matter, that is the lesson to take from this case: a well-written contract upfront can prevent costly litigation down the road.
    


[1] Texas contract law requires the following five factors to be a valid contract: (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.

[2] Mutual assent is the event where contract negotiations change into a viable contract.

[3] Browne Grain Co. v. Walker, 206 S.W. 859 (Tex. App. - Amarillo [7th Dist.], 1918)