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Texas Statute of Frauds and The Partial Performance Exception

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Under Texas law, the Statute of Frauds requires that contracts regarding the sale of lands be in writing. There are some exceptions to this “in writing” requirement, particularly if the buyer has partially performed under the contract. The case of Zaragoza v. Jessen  provides a good reminder of the principles underlying the Statute of Frauds and the partial performance exception.

Statute of Frauds

The Statute of Frauds is codified at Tex. Bus. & Comm. Code § 26.01(a) & (b) which states, in pertinent part:

“(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: … (4) a contract for the sale of real estate … ”

In terms of what constitutes a “contract,” multiple documents can be read together to comprise the contract. Thus, to be “in writing,” there must be one or more pieces of writing that is/are complete so that a court does not have to resort to oral testimony to ascertain the fundamental terms of the contract. For example, in Dobson v. Metro Label Corp. the Court stated that if “… resort to oral testimony is necessary to complete the material terms of the contract, … as a matter of law the memorandum does not satisfy the Statute of Frauds.”

The writing/writings must be sufficient, in every material detail, to describe the property, the price and all of the essential elements of the agreement so that the intent of the parties can be ascertained.

Exceptions to the Statute of Frauds

 The doctrine of partial performance is an exception to the Statute of Frauds. If there is an oral agreement for the sale of land or a written contract for the sale of land that is only partially sufficient, if the buyer begins performance, then the Statute of Frauds will not prevent the buyer from enforcing the contract. This is based on equitable principles that to deny enforcement would amount to a fraud because:

  • The buyer has acted in reliance on the oral/non-conforming contract
  • The buyer has begun performance and thereby suffered a detriment and
  • The seller would reap a windfall or unjust enrichment if the buyer is barred from enforcing the contract

Under Texas case law, a purchaser of land may enforce an oral contract with this exception by showing:

  • Payment of the consideration
  • Possession of the property, and
  • Valuable improvements or other facts that would make the transaction a fraud on the purchaser if the contract remains unenforced.

Facts of Zaragoza v. Jessen

 The principles of the Statute of Frauds and the partial performance exception can be seen in the Zaragoza v. Jessen case. The Zaragozas owned a home located in El Paso, Texas. In 2007, Mr. and Mrs. Zaragoza offered to sell the home to the Jessens. Two documents were prepared by Mrs. Zaragoza that required, for example, that the Jessens remit a downpayment of $73,010 and assume payment of the first mortgage on the property held by a lending institution. The documents contained various promises by the Zaragozas, including a promise to deed the house to the Jessens after they complied with their obligations under the documents.

However, The documents did not satisfy the Statute of Frauds because the Zaragozas never signed them.

The Zaragozas failed to honor any of their obligations under the documents including deeding the house over to the Jessens. The Jessens sued for breach of contract and fraud and sought punitive damages and attorney’s fees. The Zaragozas asserted the Statute of Frauds defense with evidence that the 2007 documents were never signed. However, the trial court rejected the argument since the evidence clearly established the partial performance exception. The Jessens partially performed as follows:

  • Paid the $73,010 down payment
  • Began paying the first mortgage
  • Eventually paid $33,990.00 to zero-out the first mortgage
  • Made the property habitable with $9,717.41 in improvements which included replacing the air conditioner, re-tiling and re-carpeting portions of the house, and various electrical and plumbing repairs
  • Paid the property taxes in 2009

The trial court ultimately awarded judgment to the Jessens for $131,277 of actual damages, punitive damages in the amount of $25,000, attorney’s fees, interest, and costs. The Court of Appeals affirmed. Given all that the Jessens had done, it’s hard to imagine how the Zaragozas thought they could void the contract!