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Written Agreement Is Essential In Any Texas Business Transaction

September 2017 Newsletter Article For each and every business matter, it is important, if not crucial, to have a written agreement that completely and accurately provides the details of the entire transaction. The writing should minimally outline the obligations and duties of the parties. A written contract fosters and maintains the agreement between the parties and reduces the likelihood of any dispute related to the principal terms of the contract such as performance, price, and contract length. More importantly, it may decrease the possibility of any disputed issue requiring resolution through costly and time-consuming litigation. First and foremost, the Texas Statute of Frauds mandates that certain contracts must be in writing. Any promise or agreement described in Section 26.01 or 26.02 of the Texas Business and Commerce Code is not enforceable unless the promise or agreement, or a memorandum of it, is in writing; and signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him or her. The types of business contracts included in the Texas Statute of Frauds are contracts for the sale of real estate, loans for more than $50,000, promises by a surety, a lease of real estate for a term longer than one year, a promise to pay commissions for the sale and purchase of certain commodities, and any agreement which is not to be performed within one year from the date of making the agreement. A written contract may be utilized as a record of the business transaction establishing the terms of the agreement, including important details such as payment for completed work, the level of authority of managers, and the agreement's time frame. A written contract provides more than sufficient protection for the parties if any terms or conditions are simply disputed, or partially or wholly breached. One Texas court has held that, contrary to the law in many other states, there is no duty of good faith and fair dealing in a contract unless the relationship between the parties is either formal and fiduciary or special and confidential. Otherwise, this significant and fundamental duty must be created by express language in the contract. Thus, to ensure that both parties observe a duty of good faith and fair dealing in a Texas business transaction, it is absolutely necessary to have a written agreement. In lieu of the aforementioned duty, Texas law requires that every contract contain an element of confidence and trust that all of the parties will faithfully perform their duties and obligations. However, this does not provide the same protection as a provision mandating good faith and fair dealing. Another reason that a written contract is important and advantageous in business transactions is the ability to insert confidentiality and non-disclosure provisions, which may require the parties to maintain the secrecy of the transaction as well as any shared information. Any party that violates such duties may be held liable for damages or other remedies under the agreement. Any Texas business transaction requires a careful analysis of legal issues, including important contract law issues, to ensure that the business transaction is equitable, beneficial, and feasible. At the Metcalf Adair Law firm, we can assist any employer in any business situation.

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