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Are verbal contracts enforceable in Texas?

Bimal Saraiya · October 29, 2017 ·

Verbal Contracts

When you are a small business, there’s a temptation to do business somewhat informally. Sometimes, this means you don’t fully document your transactions. Often this is because you have an existing personal or business relationship with the client and think a written contract isn’t necessary. Such a “handshake deal” (sometimes while enjoying a beverage together) is considered a verbal contract. If there’s a dispute later, is the verbal contract legally binding in Texas?

Texas Law and Verbal Contracts

Not every oral agreement is seen as binding under Texas lаw. Take, for example, executory contracts. Under the Texas Property Code, “an executory contract is nоt enforceable unless the contract is in writing and signed bу the party to be bound оr bу that party’s authorized representative.”

The incredibly boring, but immensely important, Statute оf Frauds (set forth in the Texas Business & Commerce Code) also includes other contracts that must be in writing tо be enforceable. These include the fоllоwing:

  • A promise bу an executor оr administrator tо answer out оf his own estate for any debt or damage due frоm his testator or intestate;
  • A promise bу one person tо answer fоr the debt, default, or miscarriage of another person;
  • An agreement made оn consideration оf marriage оr on consideration оf nonmarital conjugal соhаbitаtiоn;
  • A contract fоr the sale of real estate;
  • A lease оf real estate for a term longer than one year;
  • An agreement which is not tо be performed within one year frоm the date оf mаking the agreement;
  • A promise оr agreement to pay a commission fоr the sale оr purchase оf:
    • An oil оr gas mining lease;
    • An oil оr gas royalty;
    • Minerals; or
    • Mineral interest; and
  • An agreement, promise, contract, or warranty оf cure relating tо medical care or results thereof made by a physician or health care provider, but not including pharmacists.

Enforcing the Unwritten Contract

An attorney with experience in contract lаw can help you determine if your оrаl agreement falls outside the requirements fоr written contracts. The first step to enforcing a handshake agreement will be proving its existence.

How is this done? A breach оf contract claim encompasses various elements of proof. In simple terms, the party providing the goods or services must show proof that the work was performed and nоt paid fоr as promised. Similarly, the customer or client must demonstrate that payment was afforded and services оr goods were not delivered.

Easier said than done.

Hypothetical

You’re a plumber enjoying a Sunday football game when you get called by a friend. Your friend has water leaking out of a wall and you agree to go take a look, even though you don’t normally work on Sundays. You look at the wall and tell your friend that you can’t say for sure, but it would probably take you 2 hours to fix and your hourly rate is $150/hr so it will probably cost $300 to repair + the costs of parts. Your friend asks you to please fix it quickly so her house doesn’t keep flooding.

After opening up the wall, you see something unexpected and you have to go to a specialty plumbing supply store to get some parts. It take you 2 hours to get there and back. When you are done, you present your friend with a bill for $600 + $55 for arts, representing the total of 4 hours it too you to repair the plumbing.

Your friend says, “Wait a minute, that’s not what what we agreed to. You said it would cost $250.” You reply by explaining that you charge by the hour, and she counters that even if it were true, you were only at her house for 2 hours. You then explain that it took you 2 hours to get parts, and she says she never agreed to pay travel time and it’s not her fault you didn’t have the parts you needed. She also points to the wall you opened up to get to the plumbing and says you didn’t finish the job because there’s still a hole in the wall, so she shouldn’t have to pay you anything.

Then she plays with her phone and computer for a few minutes, does some web searching, and decides she just became a legal expert. She tells you that in this area, plumbers charge anywhere between $55/hr and $225/hr, so it was perfectly reasonable for her to think that $300 would be a reasonable flat fee. Furthermore, she says she’s going to sue you to pay for getting the wall repaired and painted if you don’t restore it back to its original condition.

What happens?

Well, first of all, she’s probably not your friend anymore. Second, this hypothetical represents a number of different issues, not just the enforceability of a verbal contract. This is a classic “he said, she said”. There was a verbal contract for you, the plumber, to repair the leak and to get compensated in return. But on what terms? Don’t you wish you had your friend sign an estimate with terms and conditions? Think about how much time and expense is going to go into litigating this in court.

As for the answer, lawyers and law professors everywhere will answer, “it depends.” There are too many issues and unknowns to say for sure, but ultimately, I think neither side wins. I have reasons for my opinions and I’d be happy to share them with you if you email me. That’s what makes hypotheticals fun – the spirited debate and altering viewpoints.

 

If you have a business, you should have clearly drafted documents and policies in place so you don’t run into this type of situation. An experienced business attorney can help you plan and prepare so future issues such as this don’t arise. Utilizing an attorney ahead of time is like insurance – some time and attention now can save you significantly in the future. Contact us to learn more about how we can help.

 

Expect the unexpected

Bimal Saraiya · September 22, 2017 ·

A Professionally Drafted Contract Can Save You

In business, things rarely go as planned. It’s important to protect yourself against unexpected results or worst-case scenarios. One way you can do that is through the use of professionally drafted legal documents and contracts.

Don’t be surprised

Issues are especially likely to come up when only one side drafted the contract and the other side did not review it thoroughly. Sometimes contracts don’t take into account impossible situations. Sometimes events such as weather make the terms of the contract impractical. These are issues that can be avoided with proper forethought and planning.

You know where else unexpected things happen? College Football.

Since it’s a Friday during college football season, it’s incumbent on me to try and relate this post to college football.

So far this year, 7 (I think) games have been cancelled. That is certainly unexpected. While the safety of players, fans, and students are paramount, cancellations also bring financial difficulties for teams. Luckily, the contracts generally have clauses to account for such unusual situations.

That doesn’t help the team that was expecting a payout for playing the game that now has a budget shortfall. Likewise, that natural repercussion to the contract “out” could have been planned for or insured against.

There’s always an upset

By definition, an upset is unexpected. I have 2 favorite upsets, as well as an upset that almost crushed me to my soul.

In 1997, a Purdue team with a new coach that had gone just 3-8 the previous season, took on #12 Notre Dame at home. After opening the season the previous week with a loss against Toledo, Purdue shocked absolutely everyone by beating Notre Dame.

In 2009, an unranked Purdue team that had just lost 5 straight games, won against #7 Ohio State. This game became forever known as “Purdue Harbor.”

In 2004, the finally nationally respected Boilermakers were ranked #5 when they lost to #10 Wisconsin on a last minute fumble, amid chants of “over-rated.” This game was the only game I have ever been to as an alumni and it still haunts me. Sometimes, it makes me cry. All you have to say to any Purdue faithful of a certain age is, “The Fumble,” and you will reduce them to tears.

Not all unexpected events at college involve football

This week, BYU started selling drinks with caffeine. That definitely surprised me.

Another upset in the making?

This week, Purdue takes on #8 Michigan at home. Will the newly resurgent Boilers take them down, a la Notre Dame in 1997? Is the 10th anniversary of Michigan’s surprise loss to Appalachian State a harbinger of things to come? I’m not willing to put money on the upset, but I can hope. Boiler Up!

If you need business contracts drafted or reviewed, contact us to make sure you’re protected against the unexpected. If you want to discuss Purdue football, you can contact me too.

 

A Novel Defense To Patent Litigation

Bimal Saraiya · September 20, 2017 ·

The Rocket Docket

We’re proud to call Plano, TX home. Part of being in Plano means that we are located in the Eastern District of Texas. For years, the Eastern District has been the go-to venue for patent litigation. Indeed, the venue, known for their “Rocket Docket”, is home to nearly 25% of all patent litigation that is filed. A Supreme Court decision from earlier this year may change that, but in the meantime, companies are continuing to develop novel ways to protect, assert, and defend their patents.

Patent Defense Through Sovereign Immunity

I recently read about a move by Allergan to better protect their RESTASIS® patents. Essentially, they transferred their patents to the Saint Regis Mohawk Tribe. The Tribe is not subject to inter partes review due to sovereign immunity.

This is a novel move on the part of Allergan that gives them the same defensive mechanisms available to state-owned universities. Ultimately, whether or not this is good or bad remains to be seen. But I imagine we’ll be seeing other patent owners reach similar deals in the near future.

Why am I boring you with this?

How does this relate to what I do as a lawyer? It doesn’t – at least not directly. But this particular legal maneuvering struck home because the very last credit I earned to get my law degree was based on a paper I wrote regarding patents and sovereign immunity.

If you’ve got patent questions, or any other intellectual property questions, I’d be happy to discuss them with you. Give our office a call to schedule an appointment.

 

 

Attorney vs. chatbot advice

Bimal Saraiya · September 18, 2017 ·

Can an attorney be replaced by a chatbot?

A “robot lawyer” chatbot, available in all 50 states since July, is promising to help you sue Equifax for the data breach without hiring a lawyer. I wrote about the data breach last week, and pointed out the controversy over the arbitration clause that has since been resolved. This has opened up the ability for anyone affected to sue Equifax. Should you and what kind of advice do you need?

Initiating a lawsuit is not something to be taken lightly. It can be expensive, stressful, and time-consuming. Small claims courts exist to minimize these hurdles, but unfortunately it’s not like Judge Judy. There are still forms, procedures, hearings, arguing, and the pesky law.

Enter the chatbot

This chatbot was initially created to help defend against parking tickets. The creator claims that the bot can now handle 1,000 different issues. It simply asks you a few questions and creates forms or letters for you to print and sign. In the case of suing Equifax, it drafts a small claims petition and gives you some basic information on what to do with it.

Regrettably, as I’ve written before, lawyering is a lot more complex than just filling out forms.

Don’t shortcut the process

When I first meet a client, I typically spend an hour or two with them to fully understand the issue and their needs and goals. I ask a lot of questions. Many times, things come to light that the client didn’t think was important or relevant. Without a firm grasp of all of the fact and circumstances, advice could be wrong or incomplete. A bot can’t make the same inferences and logical leaps an attorney can. It can’t tell you everything you need to know based on a few typed questions and answers.

Even worse, a bot won’t ask you detailed questions that may change the equation entirely. About 1/3 of the time, I find myself explaining to a potential client that while they can proceed in the manner they envision, they shouldn’t. In these cases the action won’t culminate in their desired result or worse, may adversely affect their long-term goals.

As a software developer, I’m well aware of the advances in artificial intelligence. But we’re still a long way from a bot fully understanding the nuances of case-law, human emotion, practicality, and how it all relates to a given set of facts.

And then what?

So you decide to take matters into your own hands. You’ve used a bot and researched the issue online. You’ve figured out that you need to fill out a form and file it. And then what? What are you going to do with this form? Does it need to be filed? Does it need to be served? What if the other party refuses to respond? What if there’s a hearing – do you know what to argue and how? Do you know all the rules to make sure that even if you win, it can’t be set aside because you didn’t follow all the proper procedures?

There are a lot of things you can do yourself. Even in the legal world. There are routing things that really do involve just filing out a form and mailing it in. For example, if you own a home in Texas, you should make sure you file a Homestead Exemption Application. You absolutely do not need an attorney for that.

But if you have a dispute or don’t understand a contract or just don’t know your rights, an attorney can be a valuable ally in helping you protect your interests.

I ain’t afraid of no bots

(Apologies to Ray Parker, Jr.)

To be clear, I’m not afraid of a bot. I don’t arbitrarily dislike online legal services because it’s competition. I’m all for increased access to the law for all people, and I wish more people were able to solve problems without having to dive into legal intricacies, procedures, and bureaucracy. But a neutral advocate who can holistically guide you can be an invaluable asset in solving your problem.

You get what you pay for

While this isn’t always the case, it is true more often than not. Free legal advice is sometimes worth exactly what you paid. Sometimes, it can be worth even less. If you take an action that’s not allowable at law, you can not only lose whatever expenses you incurred, you may even be ordered to pay the fees of the other party.

If you have a legal question or issue, call us to see if we can help. We’re located in Plano, TX and represent clients throughout Collin County. We handle business matters, estate planning matters, contracts, trademarks, real-estate transactions, and more. If you have issues that extend to California or Colorado, we can help – we’re licensed there too.

The Ruby Chocolate Trade Secret

Bimal Saraiya · September 15, 2017 ·

Mmmm… chocolate!

Courtesy Barry Callebaut Group

There’s now another type of chocolate! A Swiss chocolate maker has produced a new type of chocolate from the Ruby cocoa bean. The new ruby chocolate, developed by Barry Callebaut (whose chocolate is excellent for making desserts), joins dark, milk, and white as chocolate varieties.

Callebaut has not disclosed how it is produced. It is, therefore, a trade secret.

Intellectual Property Law

Intellectual Property Law is not just patents. It encompasses 4 distinct areas: a) Patents, b) Trademarks, c) Copyrights, and d) Trade Secrets. Trade secrets can be an important tool in maintaining the value of your business.

Trade Secrets

There are some famous trade secrets out there. Probably the most famous is the recipe for Coke. Another trade secret you’ve probably consumed is the Colonel’s Secret Recipe at KFC. Yet another is the recipe for Mrs. Field’s Cookies (despite the email you may have received to the contrary.)

But not all trade secrets involve food. The formula for WD-40 is a trade secret. While you can eat the end product, the mechanism of making Krispy Kreme’s warm donuts that jump into my mouth is a trade secret. And arguably the most valuable trade secret today is Google’s Search Algorithm.

Trade Secret Law

Trade Secret Law is governed by state law. There are specific things you need to do to maintain the ability to enforce your trade secret rights against others. Contact us to learn all about trade secrets and how they can be an invaluable part of your business model.

For more detailed history and stories behind some of the most iconic U.S. chocolate makers (including Hershey’s milk chocolate trade secret), I highly recommend the book “The Emperors of Chocolate” by Joël Glenn Brenner.

College Football

It’s Friday, which means we have a great weekend of College Football ahead of us. This weekend Purdue takes on my dad’s alma mater, University of Missouri. Boiler Up!

 

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Business, Trademark, & Estate Planning Lawyers
7160 Preston Road, Suite 100
Plano, TX 75024
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info@saraiyalaw.com

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