Texas Bankruptcy Court Upholds Oral Contract

In the bankruptcy case of an unregistered architect here in Texas, the former clients of the debtor submitted a claim saying that the debtor breached contract and/or that their oral contract is void because he is not a registered architect. After hiring the debtor to perform architectural work on their home, the claimants also said that they did not have to pay the debtor because the contract was not valid. But the bankruptcy court disagreed.

Under Texas law, the elements of a cause of action for breach of contract are: (a) the existence of a valid, enforceable contract; (b) plaintiff has standing to sue for breach of the contract; (c) plaintiff performed, tendered performance or was excused from performing its contractual obligations; (d) defendant breached the contract; and (e) defendant’s breach caused plaintiff’s injury. Aguiar v. Segal, 167 S.W.3d 443, 450 (Tex. App – Houston [14th Dist.] 2005, no pet).

Verbal Contracts are Enforceable in Texas

A verbal contract is enforceable in Texas. The oral agreement between the debtor and the claimants is valid despite the fact that the debtor is not a registered architect. The bankruptcy court concluded that since the debtor never made any claims that he was a registered architect and since he was designing changes to a single family home he was exempt from the requirement to register as an architect in Texas, and that is according to state law. It’s important to note that the bankruptcy courts in Texas will generally respect legal and valid contracts whether they are written or oral.