Contract Basics for Litigators: Texas

STATE Q&A

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by Evan A. Moeller and Aaron G. McLeod, Adams and Reese LLP, with Practical Law Commercial Litigation

Status: Law stated as of 19 Oct 2020 | Jurisdiction: Texas, United States

This document is published by Practical Law and can be found at: us.practicallaw.tr.com/w-025-4730

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A Q&A guide to state law on contract principles and breach of contract issues under Texas common

law. This guide addresses contract formation, types of contracts, general contract construction

rules, how to alter and terminate contracts, and how courts interpret and enforce dispute resolution

clauses. This guide also addresses the basics of a breach of contract action, including the elements

of the claim, the statute of limitations, common defenses, and the types of remedies available to the

non-breaching party.

Contract Formation

1. What are the elements of a valid contract

in your jurisdiction?

In Texas, the elements of a valid contract are:

• An offer.

• Acceptance in strict compliance with the terms of the

offer.

• Consideration.

• Mutual assent (meeting of the minds) regarding

material terms.

• Execution and delivery of the contract with the intent

that it be mutual and binding.

(Baylor Univ.v.Sonnichsen, 221 S.W.3d 632, 635 (Tex.

2007); Arshadv.Am. Express Bank, FSB, 580 S.W.3d

798, 804 (Tex. App.—Houston [14th Dist.] 2019, no

pet.); 2001 Trinity Fund, LLCv.Carrizo Oil & Gas, Inc.,

393S.W.3d 442, 449 (Tex. App.—Houston [14th Dist.]

2012, pet. denied).)

Offer

Under Texas law, an offer is a statement or conduct

that shows with reasonable certainty an intent by the

offeror to enter into a binding agreement with the

offeree (Tauchv.Angel, Trustee for Gobsmack Gift Tr.,

580S.W.3d 808, 813 (Tex. App.—Houston [14th Dist.] 2019,

pet.denied); Principal Life Ins. Co.v.Revalen Dev., LLC,

358S.W.3d 451, 455 (Tex. App.—Dallas 2012, pet. denied)).

To prove a valid offer, a party must show that:

• The offeror intended to make an offer. The offeror’s

conduct and language must show with reasonable

certainty an intent to enter a binding contract with the

offeree. An invitation to engage in negotiations does not

show an intent to make an offer.

• The terms of the offer were clear and deﬁnite. The

offeree cannot accept an offer to form a contract unless

the terms of the offer are reasonably certain (Fort Worth

Indep. Sch. Dist.v.City of Fort Worth, 22 S.W.3d 831, 846

(Tex. 2000) (no contract existed where the agreement

to share revenue lacked essential terms regarding the

percentage of revenue the plaintiff receives); Engelman

Irrigation Dist.v.Shields Bros., Inc., 960 S.W.2d 343, 352

(Tex. App.—Corpus Christi 1997, pet. denied).)

• The offeror communicated the essential terms of the

offer to the offeree.

(Tauch, 580 S.W.3d at 814; Domingov.Mitchell, 257

S.W.3d 34, 39 (Tex. App.—Amarillo 2008, pet. denied).)

An offer may be revoked at any time before acceptance

(Tauch, 580 S.W.3d at 815). Revocation is effective either

when it is communicated directly to the offeree or when the

offeree receives notice of the offeror’s intention to revoke

(Kidwillv.Werner, 2006 WL 3627883, at *1 (Tex. App.—Waco

Dec. 13, 2006, no pet.) (mem. op.); Valenciav.Garza, 765

S.W.2d 893, 896 (Tex. App.—San Antonio 1989, no writ)).

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Contract Basics for Litigators: Texas

• A beneﬁt to the promisor.

• A loss or detriment to the promisee.

(Ulico Cas. Co.v.Allied Pilots Ass’n, 262 S.W.3d 773, 790-91

(Tex. 2008) (the detriment must induce the making of

the promise and the promise must induce the incurring

of a detriment); TLC Hospitality, LLCv.Pillar Income Asset

Mgmt., Inc., 570 S.W.3d 749, 760-61 (Tex. App.—Tyler

2018, pet. denied) (obligations must be imposed on both

parties at the inception of the contract or else the contract

lacks consideration).)

Consideration must be sufﬁcient. A single consideration

is sufﬁcient to support multiple bargained-for promises

in a single contract (Birdwellv.Birdwell, 819 S.W.2d 223,

228 (Tex. App.—Fort Worth 1991, writ denied)). Past

consideration or a promise to fulﬁll a pre-existing duty is

not sufﬁcient consideration (Alex Sheshunoff Mgmt. Servs.,

L.P.v.Johnson, 209 S.W.3d 644, 659 (Tex. 2006) (Jefferson,

C.J., concurring)). Consideration is presumed sufﬁcient

to support a contract when the contract is in writing and

signed by the parties to be charged (McLernonv.Dynegy,

Inc., 347 S.W.3d 315, 335 (Tex. App.—Houston [14th Dist.]

2011, no pet.)).

Lack of consideration is an afﬁrmative defense to a contract

that must be pleaded and proved by the defendant

(Roarkv.Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 495

(Tex. 1991); TLC Hospitality, LLC, 570 S.W.3d at 761).

Mutual Assent

Under Texas law, the creation of a binding contract

requires mutual assent or a “meeting of the minds”

regarding the essential terms of the contract (David J.

Sacks, P.C.v.Haden, 266 S.W.3d 447, 450 (Tex. 2008)).

This is an objective determination based on the parties’

actions and statements, not on their subjective state of

mind. It requires both parties to understand and agree to

the subject matter and essential terms of their agreement.

(City of The Colonyv.N. Tex. Mun. Water Dist., 272 S.W.3d

699, 720 (Tex. App.—Fort Worth 2008, pet. dism’d).)

The essential terms of a contract must be agreed on

before a party can enforce the contract. Terms are

essential and material if the parties would reasonably

regard them as a vital element of the bargain (Barrow-

Shaver Res. Co.v.Carrizo Oil & Gas, Inc., 590 S.W.3d

471, 481-82 (Tex. 2019).) A contract is unenforceable if

the essential terms are uncertain or omitted (Shipleyv.

Vasquez, 534 S.W.3d 482, 487 (Tex. App.—San Antonio

2017, pet. denied); Meruv.Huerta, 136 S.W.3d 383, 391

(Tex. App.—Corpus Christi 2004, no pet.) (agreement

Acceptance

Under Texas law, to prove a valid acceptance of an offer, a

party must show:

• The acceptance was made before the offer lapsed or

was revoked by the offeror (Advantage Physical Therapy,

Inc.v.Cruse, 165 S.W.3d 21, 25-26 (Tex. App—Houston

[14th Dist.] 2005, no pet.)).

• The offeree accepts the offer:

– in a manner that strictly complies with the offer’s terms

(if the offer requires a speciﬁc manner of acceptance); or

– in a reasonable way from the overall circumstances if

the offer does not specify the manner of acceptance.

• The acceptance was communicated to the offeror.

• The acceptance was clear and deﬁnite.

(Tecore, Inc.v.AirWalk Comms., 418 S.W.3d 374, 385

(Tex. App.—Dallas 2013, pet. denied); Angelouv.African

Overseas Union, 33 S.W.3d 269, 278-79 (Tex. App.—

Houston [14th Dist.] 2000, no pet.); Engelman Irrigation

Dist., 960 S.W.2d at 352; Valencia, 765 S.W.2d at 896-97.)

If an acceptance is made via mail, it is made when notice

of the acceptance is physically transmitted to the offeror,

such as dropping it into a mailbox (the mailbox rule) (Am.

Heritage Life Ins.v.Koch, 721 S.W.2d 611, 613 (Tex. App.—

Tyler 1986, writ ref’d n.r.e.) (this rule does not apply if the

offer stipulates that the acceptance must be received

before the contract is completed)). The mailbox rule may

not apply if the offeror requires that certain conditions

be met for acceptance (Cantuv.Cent. Educ. Agency, 884

S.W.2d 565, 566-67 (Tex. App.—Austin 1994, no writ)

(where offeror made no requirements on how offer should

be accepted, offer was accepted once acceptance was

dropped in the mail).)

The acceptance must be identical to the offer to make a

binding contract (GasMark, Ltd.v.Kimball Energy Corp.,

868 S.W.2d 925, 928 (Tex. App.—Fort Worth 1994, no

writ)). An acceptance that does not mirror the material

terms of the offer is both a rejection of the original offer

and a counteroffer (Principal Life Ins. Co., 358 S.W.3d at

455 (parties must agree to the same thing, in the same

sense, at the same time)).

Consideration

Under Texas law, a contract must be based on

consideration (sometimes called mutuality of obligation).

Consideration is the bargained for exchange of promises

and consists of either:

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Contract Basics for Litigators: Texas

to enter into negotiations in the future is unenforceable

because there is no way to determine what contract

the negotiations may produce)). Essential terms are

determined on a case-by-case basis (Fischerv.CTMI,

L.L.C., 479 S.W.3d 231, 237 (Tex. 2016)).

Mutual assent may be either:

• Expressly stated in the contract (an express contract).

• Inferred from the circumstances (an implied-in-fact

contract).

(BoRain Capital, LLCv.Hashmi, 533 S.W.3d 32, 36

(Tex.App.—San Antonio 2017, pet. denied).)

Delivery and Execution with Intent to

BeBound

Under Texas law, the parties form a binding contract by

delivering it to the appropriate party. Delivery occurs

when the party parts with possession or custody of an

instrument with the intent that it become operative

(Scaifev.Associated Air Ctr. Inc.,100 F.3d 406, 410-11

(5thCir. 1996) (applying Texas law) (no contract was

formed where the contract was never delivered or signed

by the parties and work under the contract never began);

Mid-Continent Cas. Co.v.Global Enercom Mgmt. Inc., 323

S.W.3d 151, 157 (Tex. 2010).)

However, a contract need not be signed and delivered if

the contract does not require it and the parties show intent

by their conduct to be bound (Baylor Univ.v.Sonnichsen,

221 S.W.3d 632, 635 (Tex. 2007) (no mutual assent to form

a contract where university never delivered signed draft of

employment contract to plaintiff)).

2. What categories of contracts must be in

writing to satisfy your jurisdiction’s statute

of frauds?

Under Texas law, the statute of frauds requires certain

types of contracts to be in writing and signed by the person

(or an authorized agent) against whom enforcement is

sought (Tex. Bus. & Com. Code Ann.§26.01(a)). The types

of contracts required to be in writing include:

• A promise by an executor or administrator to answer out

of the person’s own estate for any debt or damage due

from the person’s testator or intestate (Tex. Bus. & Com.

Code Ann.§26.01(b)(1)).

• A promise to pay the debt, default, or miscarriage of

another person (an oral suretyship) (Tex. Bus. & Com.

Code Ann.§26.01(b)(2)).

• An agreement made on consideration of marriage or

on consideration of nonmarital conjugal cohabitation

(Tex.Bus. & Com. Code Ann.§26.01(b)(3)).

• A contract for the sale of real estate (Tex. Bus. & Com.

Code Ann.§26.01(b)(4)).

• A real estate lease for a term longer than one year

(Tex.Bus. & Com. Code Ann.§26.01(b)(5)).

• Any agreement that cannot be performed within one

year from the date the agreement was made (Tex.

Bus.& Com. Code Ann.§26.01(b)(6)).

• A promise or agreement to pay a commission for the

sale or purchase of:

– an oil or gas mining lease;

– an oil or gas royalty;

– minerals; or

– a mineral interest.

(Tex. Bus. & Com. Code Ann.§26.01(b)(7)(A)-(D).)

• An agreement, promise, contract, or warranty of cure

relating to medical care or results thereof made by a

physician or health care provider as deﬁned in Texas

Civil Practice and Remedies Code Ann.§74.001, but not

pharmacists (Tex. Bus. & Com. Code Ann.§26.01(b)(8)).

• A loan agreement for an amount more than $50,000 as

deﬁned by Texas Business and Commerce Code§26.02(b)

(Tex. Bus. & Com. Code Ann.§26.02(a)(1)).

• A contract for the sale of goods valued at $500 or

more with certain exceptions (Tex. Bus. & Com. Code

Ann.§2.201(a)).

3. In your jurisdiction, what must the writing

contain to satisfy the statute of frauds?

Under Texas law, a writing satisﬁes the statute of frauds

if it:

• Contains all the essential elements of the agreement.

Terms are essential if the parties:

– reasonably regard the terms as vitally important to

the elements of the bargain; and

– intended them to be essential.

(Burrusv.Reyes, 516 S.W.3d 170, 186-87 (Tex. App.—El Paso

2017, pet. denied) (because the law implies a reasonable

time for performance, time for performance is not an

essential term); see also Kananv.Plantation Homeowner’s

Ass’n, Inc., 407 S.W.3d 320, 330 (Tex. App.—Corpus Christi

2013, no pet.) (to be enforceable, a contract must deﬁne

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Contract Basics for Litigators: Texas

essential elements with sufﬁcient detail so a court can

determine the obligations of the parties).)

• Is complete within itself in every material detail.

• Can be ascertained from the writing without having to

resort to oral testimony or parol evidence.

• Demonstrates an intent by the parties to be bound by

the contract.

• Is signed by the party to be charged.

(Capano Energy, LLC, 593 S.W.3d at 729-30 (emails

between a landowner and energy company regarding

payment for easement did not satisfy the statute of frauds

where the emails did not contain all of the essential

elements of the contract); Hartford Fire Ins. Co.v.C. Springs

300, Ltd., 287 S.W.3d 771, 778-79 (Tex. App.—Houston [1st

Dist.] 2009, pet. denied) (writing that contemplated future

contract or promise does not satisfy statute of frauds);

Swinehartv.Stubbeman, McRae, Sealy, Laughlin & Browder,

Inc., 48 S.W.3d 865, 877 (Tex. App.—Houston [14th Dist.]

2001, pet. denied) (essential elements of a contract may

never be supplied by parol evidence, but details which

explain or clarify essential terms may be proven by parol

evidence).)

Partial performance is an exception to the statute of

frauds and may take a contract out of the statute (Burrus,

516 S.W.3d at 182-85; Thomasv.Miller, 500 S.W.3d 601,

609 (Tex. App.—Texarkana 2016, no pet.)).

Types of Contracts

4. Describe the types of contracts your

jurisdiction recognizes. Please include how

your jurisdiction deﬁnes each type.

Texas law recognizes the following types of contracts:

• Express.

• Implied-in-fact.

• Quasi-Contract, or implied-in-law.

• Unilateral and Bilateral.

Express Contract

A contract is express when its terms have been explicitly

set out by the parties. The parties’ mutual agreement to be

bound by the contract is expressly stated in the contract,

rather than by the parties’ conduct (E-Learning LLCv.AT&T

Corp., 517 S.W.3d 849, 858 (Tex. App.—San Antonio 2017,

no pet.); Wal-Mart Stores, Inc.v.Lopez, 93 S.W.3d 548, 557

(Tex. App.—Houston [14th Dist.] 2002, no pet.).)

Implied-in-Fact Contract

An implied-in-fact contract is based on inferences

from the facts and circumstances of the case. The

court implies mutual assent from the parties’ acts and

conduct (McAllen Hosps., L.P.v.Lopez, 576 S.W.3d 389,

392 (Tex. 2019) (implied-in-fact contract not established

between hospital and nurses for annual salary where

there was no evidence hospital intended to be bound

by the agreement); Wal-Mart Stores, Inc., 93 S.W.3d at

557-58 (meeting of the minds is an essential element of

an implied contract and is evidenced from conduct and

course of dealing)).

Quasi-Contract

A quasi-contract, also called an implied-in-law contract,

is a legal ﬁction imposed regardless of any actual

agreement between the parties (Walkerv.Cotter Props.,

Inc., 181 S.W.3d 895, 900 (Tex. App.—Dallas, 2006, no

pet.) (recovery of damages is appropriate to prevent a

party from obtaining a beneﬁt from another by fraud,

duress, unjust enrichment, or undue advantage)). A

quasi-contract imposes an obligation between two

parties in the interest of justice even though it is clear

that no promise was ever intended or made. A party

generally cannot recover under the theory of a quasi-

contract when a valid, express contract exists that covers

the subject matter of the parties’ dispute. (Fortune

Prod. Co.v.Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000)

(recovery under an equitable theory is inconsistent with

the existence of a valid contract).)

A plaintiff asserting breach of a quasi-contract typically

seeks restitution under quantum meruit or unjust

enrichment (Burlington N. R.R. Co. v.Sw. Elec. Power Co.,

925 S.W.2d 92, 97 (Tex. App.—Texarkana, 1996) aff’d

966 S.W.2d 467 (Tex. 1998) (law implies a contractual

obligation on the defendant to restore beneﬁts to the

plaintiff where the defendant has been unjustly enriched

in a matter not governed by a contract); Houston Med.

Testing Servs., Inc.v.Mintzer, 417 S.W.3d 691, 698 (Tex.

App.—Houston [14th Dist.] 2013, no pet.) (law imposes

an obligation in the interest of justice even though no

promise was made or intended and there was no meeting

of the minds)).

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Unilateral and Bilateral Contracts

A bilateral contract exists when:

• There are mutual promises between two parties,

making each both a promisor and a promisee

(Vanegasv.Am. Energy Servs., 302 S.W.3d 299, 302

(Tex. 2009)).

• Each promise is sufﬁcient consideration for the other

(Frequent Flyer Depot, Inc. v. Am. Airlines, Inc., 281 S.W.3d

215, 224 (Tex. App.—Fort Worth 2009, pet. denied)

(there must be mutuality of obligation which may consist

of beneﬁts or detriments to the contracting parties)).

A unilateral contract exists when a promisor promises a

beneﬁt if a promisee performs (City of Pearsallv.Tobias,

533 S.W.3d 516, 522 (Tex. App.—San Antonio, 2017, pet.

denied)). Consideration for a unilateral contract exists not

by an exchange of promises but by a promise exchanged

for performance. Once a promisee performs, a unilateral

contract becomes enforceable. (City of Houstonv.Williams,

353 S.W.3d 128, 135 (Tex. 2011); Vanegas, 302 S.W.3d at

302 (unilateral contract existed where company’s promise

to pay at-will employees ﬁve percent of sale proceeds

if employees remained employed until sale of company

was ﬁnalized was a promise made in exchange for

performance).)

Construction of Contracts

5. What are the general rules of contract

construction in your jurisdiction? For

example, rules construing inconsistencies,

intention of the parties, deﬁnitions, etc.

Intention of the Parties

Under Texas law, courts attempt to ascertain the parties’

intentions based solely on the words used in the contract,

viewing the entire writing as a whole (Barrow-Shaver

Res. Co.v.Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 479

(Tex.2019); J.M. Davidson, Inc.v.Webster, 128 S.W.3d

223,229 (Tex. 2003)).

Grammar and Meanings

Under Texas law, courts interpret the language that the

parties use in a contract by its ordinary meaning unless

it clearly appears that doing so defeats their intentions.

Words, terms, or phrases that have specialized meanings

in a certain industry or ﬁeld are treated as terms of art

and given the specialized meaning they are understood to

have. (Barrow-Shaver Res. Co., 590 S.W.3d at 479; Plains

Expl & Prod. Co.v.Torch Energy Advisors Inc., 473 S.W.3d

296, 305 (Tex. 2015) (courts interpret contracts from a

“utilitarian” standpoint, interpreting language in the

context of the business activity sought to be served by the

agreement); Heritage Res., Inc.v.NationsBank, 939 S.W.2d

118, 121-22 (Tex. 1996).)

Implied Terms

Texas courts highly disfavor implied contract terms. Texas

courts ﬁnd a contract contains implied provisions only

when the court believes that such provisions are legally

necessary to further the intentions of the parties. (HECI

Expl Co.v.Neel, 982 S.W.2d 881, 888-89 (Tex. 1998)

(courts cannot make contracts for the parties); Sharon

Ibrahm, Inc.v.Houston-Galveston Area Local Dev. Corp.,

582 S.W.3d 753, 771 (Tex. App.—Houston [1st Dist.] 2019,

no pet.) (in order to imply a term into an agreement, it

must appear that it was so necessary to the contract that

the parties inadvertently left it out and it is essential to the

contract as a whole).)

Entire Contract

Under Texas law, a court examines the entire contract and

attempts to harmonize all of its provisions, even if some

parts appear to be contradictory or inconsistent (Anadarko

Petroleum Corp.v.Thompson, 94 S.W.3d 550, 554 (Tex.

2002)). Each clause of a contract is considered in the context

of the instrument as a whole (Plains Expl & Prod. Co.v.Torch

Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015)).

Ambiguity or Inconsistency

A contractual term is ambiguous if either:

• Its meaning is uncertain or doubtful.

• It is subject to two or more reasonable interpretations

after applying the applicable rules of contract

construction.

(Italian Cowboy Partners, Ltd.v.Prudential Ins. Co. of

Am., 341 S.W.3d 323, 333 (Tex. 2011); Marxv.FDP, LP,

474 S.W.3d 368, 375 (Tex. App.—San Antonio 2015,

pet.denied).)

A contractual ambiguity is:

• A patent ambiguity where the ambiguity arises from

imprecise language appearing on the face of a written

contract.

• A latent ambiguity where the ambiguity does not

appear on the face of a contract but becomes apparent

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only when using knowledge gained from a collateral

matter. An example of a latent ambiguity is a contract

for delivery to a green house on Pecan Street when

there are two green houses on Pecan Street. (URI,

Inc.v.Kleberg Cty., 543 S.W.3d 755, 765 (Tex. 2018)).

Ambiguity does not arise merely because the parties

may disagree about the meaning of a contract term (URI,

Inc., 543 S.W.3d at 763). Courts enforce the contract

as written when the contract is unambiguous (First

Bankv.Brumitt, 519 S.W.3d 95, 105 (Tex. 2017); David J.

Sacks, P.C.v.Haden, 266 S.W.3d 447, 450 (Tex. 2008)).

If a contract is ambiguous, courts may consider the

parties’ interpretation and admit extraneous evidence

to determine the true meaning of the agreement

(URI, Inc., 543 S.W.3d at 764-65 (noting that no issue

regarding parties’ intentions is raised unless the contract

is ambiguous); Nat’l Union Fire Ins. Co. of Pittsburgh,

PAv.CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995)).

Speciﬁc Over General

Under Texas law, a contract provision speciﬁcally

addressing a particular subject matter controls over a

more general contract provision (Wells Fargo Bank, Minn.,

N.A.v.N. Cent. Plaza I, L.L.P., 194 S.W.3d 723, 726 (Tex.

App.—Dallas 2006, pet. denied)).

6. How does your jurisdiction deﬁne and

apply the parol evidence rule?

Under Texas law, the parol-evidence rule:

• Precludes evidence of prior or contemporaneous

agreements that are inconsistent with the contract,

where the contract provides that it is a complete and

accurate integration of the parties’ entire agreement (Boy

Scouts of Am.v.Response Terminal Sys., Inc., 790 S.W.2d

738, 744-45 (Tex. App.—Dallas 1990, pet. denied)).

• Applies only to written contracts (O’Farrill Avilav. Gonzalez,

974 S.W.2d 237, 246 (Tex. App.—San Antonio 1998, pet.

denied)).

• Does not preclude evidence of prior contemporaneous

agreements that are collateral to, not inconsistent with,

and do not vary or contradict the express or implied

terms of the original contract (Westv.Quintanilla, 573

S.W.3d 237, 243 (Tex. 2019); Boy Scouts of Am., 790

S.W.2d at 745 (a collateral agreement is one that the

parties might naturally have made but not ordinarily

have included in the contract)).

• Does not bar evidence of later agreements that are

used to explain or give effect to the contract and are

not inconsistent with, vary, or contradict the terms of

the original contract (Hallmarkv.Port/Cooper-T. Smith

Stevedoring Co., 907 S.W.2d 586, 590 (Tex. App.—

Corpus Christi 1995, no writ)).

When applying the parol evidence rule, a court must ﬁrst

determine if the contract is a valid integrated contract.

Courts presume that a contract is integrated if it is in

writing, executed, and includes the ﬁnal expression of

terms. The parol evidence rule is particularly applicable

when the contract recites that it contains the entire

agreement of the parties, or contains similar merger

provisions (Adamsv.McFadden, 296 S.W.3d 743, 752

(Tex. App.—El Paso 2009, pet. denied) (parol evidence

rule presumes all prior negotiations and agreements have

been merged into the written contract).)

If a contract is deemed unambiguous, parol evidence will

not be received for the purpose of creating an ambiguity

or to give a contract a meaning different from its plain

language (Charles R. Tips Family Tr.v.PB Comm. LLC,

459 S.W.3d 147, 153 (Tex. App.—Houston [1st Dist.] 2015,

no pet.)).

If a contract is found to be ambiguous, parol evidence

may be admitted to resolve the ambiguity (Charles R. Tips

Family Tr., 459 S.W.3d at 153). Courts may consider parol

evidence of the facts and circumstances surrounding

a contract’s execution as an aid in understanding the

language of the contract, but only to the extent the

extrinsic evidence does not add to, alter, or contradict the

contract’s text (URI, Inc.v.Kleberg Cty., 543 S.W.3d at 765).

Altering and Terminating Contracts

7. Describe how a party modiﬁes a contract

in your jurisdiction.

Under Texas law, the parties to the contract may modify it

by either:

• A writing executed by the contracting parties.

• An oral agreement if:

– the written contract does not preclude oral

modiﬁcations; and

– it is not a contract required by the statute of frauds or

other Texas statute to be in writing.

• A course of performance that shows a meeting of the

minds to modify the contract.

(Pointe W. Ctr., LLCv.It’s Alive, Inc., 476 S.W.3d 141, 151

(Tex. App.—Houston [1st Dist.] 2015, no pet.) (Texas courts

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consider a written bargain or agreement to be of no

higher legal degree than an oral one, as either may vary

or discharge the other); Am. Garment Props., Inc.v.CB

Richard Ellis-El Paso, L.L.C., 155 S.W.3d 431, 435 (Tex.

App.—El Paso 2004, no pet.).)

A modiﬁcation must include all the essential of a contract,

including new consideration supporting the modiﬁcation

(Pointe W. Ctr., 476 S.W.3d at 152.)

8. Does your jurisdiction recognize

novations? If so, how does your jurisdiction

deﬁne them and how are they executed?

Texas law recognizes novations. The elements of a

novation are:

• A valid existing contract.

• A mutual agreement of all parties to make a new contract.

• The extinguishment of the old contract.

• A valid new contract.

(In re B.N.L.-B, 523 S.W.3d 254, 263-64 (Tex. App.—Dallas

2017, pet. denied); Vandeventerv.All Am. Life & Cas. Co.,

101 S.W.3d 703, 712 (Tex. App.—Fort Worth 2003, no pet.)

(novation also includes the substitution of a party to the

same agreement).)

A court looks to the intentions of the parties to determine

if a novation has occurred. A party cannot create a

novation unilaterally (Vandeventer, 101 S.W.3d at 712).

Novation is an afﬁrmative defense to a claim for

breach of contract (Fulcrum Ctrl.v.AutoTester, Inc.,

102S.W.3d 274, 277 (Tex. App.—Dallas, 2003, no pet.);

Honeycuttv.Billingsley, 992 S.W.2d 570, 576 (Tex.

App.—Houston [1st Dist.] 1999, pet. denied)).

9. Describe how a party terminates a

contract in your jurisdiction.

Under Texas law, contracts typically terminate after all

contractual obligations are satisﬁed or on a date or under

conditions speciﬁed in the contract. Absent fraud, courts

generally enforce contracts that provide for termination

or that provide for cancellation without penalty. If the

contract does not have a termination provision, the law

imposes a reasonable time standard. (Cmty. Health Sys.

Prof. Servs. Corp.v.Hansen, 525 S.W.3d 671, 681 (Tex.

2017) (employment contract as written can only be

cancelled for cause during years one through three and

without cause under speciﬁed conditions for year four

and ﬁve); Tiger Truck, LLCv.Bruce’s Pulp & Paper, LLC, 282

S.W.3d 176, 183-84 (Tex. App.—Beaumont, 2009, no pet.);

Driver Pipeline Co.v.Mustang Pipeline Co., Inc., 69 S.W.3d

779, 787-88 (Tex. App.—Texarkana 2002), rev’d on other

grounds, 134 S.W.3d 195 (Tex. 2004).)

A party may also terminate a contract when:

• The other party commits a material breach or

repudiates the contract.

• The party has complied with contractual provisions

governing termination.

(Bartush-Schnitzius Foods Co.v.Cimco Refrigeration, Inc.,

518 S.W.3d 432, 436 (Tex. 2017); Guerrov.Santa Rosa

Indep. Sch. Dist., 241 S.W.3d 594, 603-04 (Tex. App.—

Corpus Christi 2007, pet. denied); Driver Pipeline Co., 69

S.W.3d at 787-88.)

Dispute Resolution Clauses

10. How does your jurisdiction interpret and

enforce choice of law provisions?

Under Texas law, choice of law provisions are enforced

where:

• There is a reasonable relationship between the parties

and the chosen state.

• The law of the chosen state is not contrary to a

fundamental policy of Texas.

(Gator Apple, LLCv.Apple Tex. Rests., Inc., 442 S.W.3d

521, 532-33 (Tex. App.—Dallas 2014, pet. denied) (parties

generally cannot choose the law of a forum that has no

relationship to the agreement); State Nat’l Bankv.Academia,

Inc., 802 S.W.2d 282, 289 (Tex. App.—Corpus Christi 1990,

writ denied).)

A Texas court may not disregard a choice-of-law

clause, however, merely because the law of the chosen

forum leads to a different result than Texas law

(DeSantisv.Wackenhut Corp., 793 S.W.2d 670, 677-81

(Tex. 1990) (applying Texas law in breach of non-compete

agreement claim despite choice of law clause applying

Florida law, where Texas had a materially greater interest

in determining enforceability of agreement and law of

Florida was contrary to fundamental policies of Texas

government non-compete law)).

Texas courts apply these principles using the framework of

the Restatement (Second) of Conﬂict of Laws§187 (1971)

(DeSantis, 793 S.W.2d at 677-78.)

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For more information on how Texas courts interpret and

enforce choice of law provisions, see Standard Clause,

General Contract Clauses: Choice of Law (TX). For an

overview of choice of law and choice of forum issues, see

Practice Note, Choice of Law and Choice of Forum: Key Issues.

11. How does your jurisdiction interpret and

enforce choice of forum provisions?

Under Texas law, choice of forum provisions may be

either permissive or mandatory. The interpretation and

enforcement of choice of forum provisions depends on

whether the breach of contract claim is pending in Texas

state or federal court.

Texas State Court Analysis

Under Texas law, choice of forum or forum selection

provisions generally are enforced if:

• The parties have contractually consented to submit to

the exclusive jurisdiction of another state.

• The other state recognizes the validity of such provisions.

(Mabon Ltd.v.Afri-Carib Enters., Inc., 29 S.W.3d 291,

296-97 (Tex. App.—Houston [14th Dist.] 2000, no pet.).)

The enforcement of forum selection clauses is mandatory

unless a party shows that either:

• Enforcement is unreasonable and unjust.

• The clause is invalid for reasons such as fraud or

overreaching.

• The enforcement of the clause goes against a strong

public policy.

• The chosen forum is seriously inconvenient for trial.

(In re Nationwide Insurance Company of America, 494

S.W.3d 708, 712 (Tex. 2016) (noting that a forum selection

clause, like other contractual rights, may be waived); In re

Automated Collection Techs., Inc., 156 S.W.3d 557, 559 (Tex.

2004); In re AIU Ins. Co. 148 S.W.3d 109, 115 (Tex. 2004).)

Forum-selection clauses are enforced regarding claims

that sound in tort, where those claims arise out of or relate

to a contract containing a valid forum selection clause.

Forum selection clauses discourage artful pleading of tort

claims in an effort to get around an otherwise binding

choice of forum clause in a contract (Pinto Tech. Ventures,

L.P.v.Sheldon, 526 S.W.3d 428, 437-39 (Tex. 2017).)

For more information on how Texas courts interpret and

enforce forum selection clauses, see Standard Clause,

General Contract Clauses: Choice of Forum (TX).

Texas Federal Court Analysis

Federal courts in Texas apply federal law to determine the

enforceability of forum selection clauses in both diversity and

federal question cases (Alliance Health Grp., LLCv.Bridging

Health Options, LLC, 553 F.3d 397, 399 (5th Cir. 2008);

Haynsworthv.The Corp., 121 F.3d 956, 961-62 (5th Cir. 1997)).

The US Supreme Court has held that courts should

enforce the parties’ contractually valid choice of forum

except in the most unusual cases (Atl. Marine Const. Co.,

Inc.v.U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49,

66 (2013); see Legal Update, Supreme Court Explains

How to Enforce Selection Clauses). The Fifth Circuit has

generally found forum selection clauses prima facie valid

and enforceable unless the party challenging enforcement

shows that the provision is unreasonable (Kevlin Servs.,

Inc.v.Lexington State Bank, 46 F.3d 13, 15 (5th Cir. 1995);

Mendozav.Microsoft, Inc., 1 F. Supp. 3d 533, 543 (W.D.

Tex. 2014)). A forum selection clause is unreasonable if:

• The inclusion of the clause was the result of fraud or

overreaching.

• The party opposing the clause essentially loses its

day in court because of the grave inconvenience or

unfairness of the selected forum.

• The chosen law is so fundamentally unfair that it

deprives the plaintiff of a remedy.

• The enforcement of the clause goes against a strong

public policy.

(Haynsworth, 121 F.3d at 963.)

12. How does your jurisdiction interpret

and enforce alternative dispute resolution

provisions, such as mediation and

arbitration clauses?

Under Texas law, courts enforce arbitration agreements

as a matter of policy. A party seeking to enforce an

arbitration clause must show:

• There is a valid arbitration agreement, as determined by

contract law principles.

• The claims at issue fall within the agreement’s scope.

(In re Dillard Dep’t Stores, Inc., 186 S.W.3d 514, 515 (Tex.

2006); Tex. Civ. Prac. & Rem. Code Ann.§171.001-171.098

(Texas Arbitration Act recognizes the validity of written

arbitration agreements regarding controversies that

exist at the time of the agreement or that arise after the

agreement).)

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The threshold questions of whether the parties have

agreed to arbitrate or whether a dispute is covered by

an arbitration agreement are issues to be resolved by

courts, unless the parties have clearly and unmistakably

agreed to submit questions of arbitrability to an

arbitrator (Weitzelv.Coon, 2019 WL 3418515, *2 (Tex.

App.—Houston [1st Dist.] July 30, 2019, no pet.) (mem.

op.) (question of arbitrability must be submitted to

arbitrator where parties had incorporated rules of

American Arbitration Association into contract and those

rules give an arbitrator power to decide these issues);

Longoriav.CKR Prop. Mgmt., LLC, 577 S.W.3d 263,

267 (Tex. App.—Houston [14th Dist.] 2018, pet. denied)

(arbitration agreements are generally valid absent

fraud, duress, unconscionability, revocation, or similar

grounds)).

Any doubts concerning the scope of arbitrable issues

should be resolved in favor of arbitration, whether the

problem at hand is the construction of the contract

language itself, an allegation of waiver or delay, or a

similar defense to arbitrability (Longoria, 577 S.W.3d at

268-69; Millerv.Brewer, 118 S.W.3d 896, 898 (Tex. App.—

Amarillo 2003, no pet.)).

For more information on Alternative Dispute Resolution

in Texas, see Standard Clause, General Contract Clauses:

Alternative Dispute Resolution (Multi-Tiered)(TX); Toolkit,

Drafting Contractual Dispute Provisions (TX): Alternative

Dispute Resolution Resources.

Breach of Contract

13. What are the elements of a breach of

contract claim in your jurisdiction?

Under Texas law, the elements of a breach of contract

claim are:

• The existence of a valid and enforceable contract

between the parties.

• The plaintiff performed, tendered performance of, or

was excused from performing the contract.

• The defendant’s failure to perform the contract.

• The plaintiff’s damages resulting from the breach.

(Pathﬁnder Oil & Gas, Inc.v.Great W. Drilling, Ltd., 574

S.W.3d 882, 890 (Tex. 2019); S & S Emergency Training

Solutions, Inc.v.Elliot, 564 S.W.3d 843, 847 (Tex. 2018);

E-Learning, LLCv.AT&T Corp., 517 S.W.3d 849, 858 (Tex.

App.—San Antonio 2017, no pet.).)

14. Describe what circumstances are

considered an actionable breach of contract

in your jurisdiction.

Under Texas law, a breach of contract occurs when a party

fails or refuses to do something that a contract obligates

it to do. A breach does not have to be material to be

actionable, but a breach must be material to discharge

the non-breaching party from further performance

obligations. A non-material breach does not excuse the

other party from any obligation to perform, however

the non-breaching party in that circumstance may sue

for damages (Bartush-Schnitzius Foods Co.v.Cimco

Refrigeration, Inc., 518 S.W.3d 432, 436 (Tex. 2017);

Mustang Pipeline Co.v.Driver Pipeline Co., 134 S.W.3d

195, 199-200 (Tex. 2004) (breach of contract requires

ﬁnding of a breach, not ﬁnding a material breach);

Hernandezv.Gulf Grp. Lloyds, 875 S.W.2d 691, 692-93

(Tex. 1994).)

In determining whether a breach is material, a court

considers whether:

• The breach deprives the injured party of the beneﬁt it

reasonably expected to receive under the contract.

• A breach of contract action can adequately compensate

the plaintiff for the beneﬁt it lost as a result of the

breach.

• The defendant is likely to suffer forfeiture.

• The defendant is likely to cure its breach under all the

circumstances.

• The defendant’s behavior comports with standards of

good faith and fair dealing.

(Bartush-Schnitzius Foods Co., 518 S.W.3d at 436-37;

Mustang Pipeline Co., 134 S.W.3d at 199; Restatement

(Second) of Contracts§241 (1981).)

Some breaches are considered material as a matter of

law, such as a failure to timely perform under a contract

providing that time is of the essence (Mustang Pipeline

Co., 134 S.W.3d at 199-200).

15. What is the statute of limitations

for a breach of contract action in your

jurisdiction? Please also discuss when the

limitations period begins to run, whether

it may be tolled, and how to plead the

defense.

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Under Texas law, the statute of limitations for a breach of

contract claim is four years (Tex. Civ. Prac. & Rem. Code

Ann.§§16.004(1), (3), and 16.051; Tex. Bus. & Com. Code

Ann.§2.725 (providing for four-year statute of limitations

for an action for breach of contract for sale under Texas’s

UCC); Carl M. Archer Tr.v.Tregellas, 566 S.W.3d 281, 288

(Tex. 2018)). Parties may agree to a different limitations

period as part of the underlying contract but cannot agree

to a period of less than two years (Spicewood Summit

Ofﬁce Condo. Ass’nv.Am. First Lloyd’s Ins., 287 S.W.3d 461,

464-65 (Tex. App.—Austin 2009, pet. denied)).

A breach-of-contract claim accrues at the time of the

actionable breach (Carl M. Archer Tr., 566 S.W.3d at 288).

For actions claiming breach of a continuing contract, the

limitations period begins to run when either:

• The parties complete the work.

• The contract terminates under its terms.

• The defendant anticipatorily repudiates the contract

and the plaintiff adopts the repudiation.

(Capstone Healthcare Equip. Servs.v.Quality Home Health

Care, Inc., 295 S.W.3d 696, 700 (Tex. App.—Dallas 2009,

pet. denied) (injured party has four years from each breach

to bring suit).)

The statute of limitations is an afﬁrmative defense that the

defendant must speciﬁcally plead and prove (Tex. R. Civ.

P. 94). A party asserting an afﬁrmative defense in a bench

trial must request ﬁndings in support of that defense to

avoid waiver on appeal (Trelltex, Inc.v.Intecx, L.L.C., 494

S.W.3d 781, 785 (Tex. App.—Houston [14th Dist.] 2016,

nopet.).)

Discovery Rule

Under Texas law, the discovery rule tolls the statute of

limitations until the plaintiff knew or should have known

the facts giving rise to the cause of action. The discovery

rule applies where the nature of the plaintiff’s injury is

inherently undiscoverable and the injury is objectively

veriﬁable (Carl M. Archer Tr., 566 S.W.3d at 290 (objective

of the discovery rule is to avoid an unjust result); B. Mahler

Interests, L.P.v.DMAC Constr., Inc., 503 S.W.3d 43, 59

(Tex. App.—Houston [14th Dist.] 2016, no pet.) (discovery

rule did not apply where plaintiff’s injuries were easily

discoverable); Via Netv.TIG Ins. Co., 211 S.W.3d 310,

315 (Tex. 2006) (noting the discovery rule is limited to

exceptional cases to avoid frustrating the purpose of the

statute of limitations).)

Equitable Estoppel

Under Texas law, equitable estoppel tolls a statute of

limitations where:

• A person with actual or constructive knowledge

of material facts makes a false representation

or concealment of those facts to a party without

knowledge or the means of obtaining knowledge of

the facts.

• The person intends that party to act on it.

• That party relies on the false representation or

concealment of facts to their detriment.

(Wydev.Francesconi, 566 S.W.3d 890, 897 (Tex. App.—

Dallas 2018, no pet.); Kamatv.Prakash, 420 S.W.3d 890,

900 (Tex. App.—Houston [14th Dist.] 2014, no pet.).)

Tolling Statutes

Texas also has statutes that operate to toll the statute of

limitations under certain circumstances. A statute may be

tolled where a party is, for example:

• Under a legal disability, such as where the party is:

– under 18 years of age, regardless of whether the

person is married; or

– of unsound mind.

(Tex. Civ. Prac. & Rem. Code Ann.§16.001; PAK Foods

Houston, LLCv.Garcia, 433 S.W.3d 171, 176 (Tex. App.—

Houston [14th Dist.] 2014, pet. denied) (a party may ratify

a contract once the minor reaches 18 years of age).)

• Prevented from bringing suit by the automatic-

stay provisions of federal bankruptcy law

(11U.S.C.§362(a); Petersonv.Tex. Commerce Bank-

Austin, Nat’l Ass’n, 844 S.W.2d 291, 294 (Tex. App.—

Austin 1992, no writ)).

• Asserting a counterclaim or cross-claim and:

– the counterclaimant or cross-claimant can show

that the counterclaim or cross-claims arise out of the

same transaction or occurrence that is the basis of

the original action; and

– the counterclaimant or cross-claimant ﬁles the

counter or cross-claim no later than thirty days after

that party’s answer is due.

(Tex. Civ. Prac. & Rem. Code Ann.§16.069; Ellardv.Ellard,

441 S.W.3d 780, 781-82 (Tex. App.—San Antonio 2014, no

pet.).)

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16. Under what circumstances does your

jurisdiction recognize a third party’s

standing to sue for breach of contract?

Under Texas law, a third party has standing to sue for

breach of contract if the third party can show that:

• It is a donee or creditor beneﬁciary of the contract.

• Is not beneﬁted only incidentally by the contract’s

performance.

(S. Tex. Water Auth.v.Lomas, 223 S.W.3d 304, 306 (Tex.

2007) (mere description of a product’s intended use

cannot confer third-party-beneﬁciary status on intended

users of product); Ostrovitz & Gwinn, LLCv.First Specialty

Ins. Co., 393 S.W.3d 379, 388 (Tex. App.—Dallas 2012,

no pet.) (landlord was not a third-party-beneﬁciary to

insurance contract between insurer and tenant where

insurance policy did not clearly and fully set out an

intention to confer a direct beneﬁt on the landlord)).

A third party is a beneﬁciary of a contract if:

• The contracting parties intended to secure a beneﬁt for

the third-party.

• The contracting parties made the contract directly for

the third-party’s beneﬁt.

(First Bankv.Brumitt, 519 S.W.3d 95, 102 (Tex. 2017).)

The intention of the contracting parties is controlling.

The contract must show an intent to provide a direct

beneﬁt to the third party and that intention must be

clearly and fully spelled-out. (Ostrovitz, 393 S.W.3d at

388 (it is not enough that the third-party beneﬁts from

the parties’ performance or that the parties knew the

third-party beneﬁts).)

There is a presumption against third-party beneﬁciary

agreements in Texas (First Bank, 519 S.W.3d at 103).

Courts resolve all doubts against conferring third-party

beneﬁciary status (Ostrovitz, 393 S.W.3d at 388).

Remedies for Breach of Contract

17. What legal remedies are available to the

non-breaching party in your jurisdiction?

Under Texas law, the prevailing plaintiff in a breach of

contract action typically may recover compensatory

damages, which include:

• General (also called direct) damages.

• Special (also called consequential) damages.

(Dallas/Fort Worth Int’l Airport Bd.v.Vizant Tech., LLC, 576

S.W.3d 362, 373 (Tex. 2019); Arthur Andersen & Co.v.Perry

Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997).)

Attorney fees are recoverable on a claim for a breach of an

oral or written contract once a party has prevailed on a valid

contract claim (Tex. Civ. Prac. & Rem. Code Ann.§38.001;

MBM Fin. Corp.v.Woodlands Operating Co., L.P., 292 S.W.3d

660, 666 (Tex. 2009); Mustang Pipeline Co., Inc.v.Driver

Pipeline Co., Inc., 134 S.W.3d 195, 201 (Tex. 2004)).

Punitive damages or exemplary damages are not

recoverable in a breach of contract action (Signal Peak

Enters. of Texas, Inc.v.Bettina Invs., Inc., 138 S.W.3d 915,

928 (Tex. App.—Dallas 2004, pet. stricken)). A plaintiff may

recover punitive damages if the defendant breaches a legal

duty separate from the contract in addition to the breach of

the contract (Twin City Fire Ins.v.Davis, 904 S.W.2d 663, 665

(Tex. 1995); Cent. Sav. and Loan Ass’nv.Stemmons Nw. Bank,

N.A., 848 S.W.2d 232, 238 (Tex. App.—Dallas 1992, no writ)).

Compensatory Damages

The purpose of compensatory damages is to restore the

plaintiff to the same position they would have been in had

the defendant not breached the contract. Compensatory

damages include:

• General damages. General (or direct) damages

ﬂow naturally and necessarily from the breach and

compensate for the loss that is conclusively presumed

to have been foreseen or contemplated by the party

as a consequence of the breach of contract (Arthur

Andersen& Co., 945 S.W.2d at 816; Powell Elec. Sys,

Inc.v.Hewlett Packard Co., 356 S.W.3d 113, 118 (Tex.

App.—Houston [1st Dist.] 2011, no pet.)).

• Special damages. Special or consequential damages

result naturally, but not necessarily from the breach of

contract. Plaintiffs may recover consequential damages

only where the damages are foreseeable and directly

traceable to the wrongful act and result from it. The

parties must have contemplated at the time they made

the contract that the damages would be a probable

result of the breach (Stuartv.Bayless, 964 S.W.2d

920, 921 (Tex. 1998); Powell Elec. Sys., Inc., 356 S.W.3d

at 118 (recovery of costs for installation of temporary

transformer during repairs for damages caused by breach

were consequential damages where parties cannot have

conclusively presumed to have foreseen that the breach

necessitates use of a temporary transformer).)

The plaintiff in a breach of contract action may seek

several types of compensatory damages, including:

• Expectancy (or beneﬁt of bargain) damages. Expectancy

or beneﬁt of the bargain damages give the plaintiff the

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beneﬁt of the plaintiff’s bargain by placing it in as good a

position as it can be if the contract had been performed

(Qaddurav.Indo-European Foods, Inc., 141 S.W.3d 882,

888-89 (Tex. App.—Dallas 2004, pet. denied)).

• Reliance damages. Reliance damages restore

any expenditures made in reliance on the contract

(Siamv.Mountain Vista Builders, 544 S.W.3d 504, 515-

16 (Tex. App.—El Paso 2018, no pet.)). These are useful

when a plaintiff’s expectation interest damages, like

lost proﬁts, are too speculative or uncertain (Mistletoe

Express Serv.v.Locke, 762 S.W.2d 637, 638-39 (Tex.

App.—Texarkana 1988, no writ)).

(O’Farrill Avilav.Gonzalez, 974 S.W.2d 237, 247 (Tex.

App.—San Antonio 1998, pet. denied).)

A plaintiff can recover nominal damages even if the plaintiff

cannot prove actual damages (MBM Fin. Corp.v.Woodlands

Operating Co. L.P., 292 S.W.3d 660, 664-65 (Tex. 2009)).

Parties to a contract are free to agree to limit or modify

remedies if a breach occurs (Frost Nat’l Bankv.Heafner,

12 S.W.3d 104, 111 (Tex. App.—Houston [1st Dist.] 1999,

pet. denied) (recovery of beneﬁt of the bargain damages

not allowed where contract excluded recovery of

consequential damages)).

Restitution Damages

A plaintiff can be awarded restitution, which restores to

the plaintiff any property or money taken from the plaintiff

by the defendant, where it is unjust for the defendant to

keep any beneﬁts the defendant has received (City of Harker

Heightsv.Sun Meadows Land, Ltd., 830 S.W.2d 313, 317

(Tex. App.—Austin 1992, no writ)). If the restitution damages

necessarily result from the breach of contract, these damages

are general or direct damages rather than compensatory

damages (Marrs & Smith P’shipv.Sombrero Oil & Gas Co., 511

S.W.3d 53, 59 (Tex. App.—El Paso 2014, no pet.)).

Liquidated Damages

Contracts may contain a liquidated damages clause,

which determines in advance the measure of damages

if a breach occurs. Courts generally enforce liquidated

damages clauses if:

• The harm caused by the breach is incapable of estimation

or is difﬁcult to estimate at the time of the agreement.

• The amount of liquidated damages provided for is a

reasonable forecast of just compensation at the time of

contracting.

(FPL Energy, LLCv.TXU Portfolio Mgmt. Co., 426 S.W.3d

59, 69 (Tex. 2014).)

Courts view evidence concerning the difﬁculty of estimation

and the reasonableness of the forecast as of the time the

parties executed the contract (FPL Energy, LLC, 426 S.W.3d

at 69-70). A liquidated damages clause is considered a

penalty and unenforceable if either of these elements is

lacking (Arthur’s Garage, Inc.v.Racal-Chubb Sec. Sys., 997

S.W.2d 803, 810 (Tex. App.—Dallas 1999, no pet.)).

For more information on liquidated damages in Texas, see

Standard Clause, General Contract Clauses: Liquidated

Damages (TX).

18. What equitable or other non-legal

remedies are typically available to the non-

breaching party in your jurisdiction?

Under Texas law, if money damages are unavailable or

inadequate to compensate the plaintiff for its loss, a court

may award equitable relief for the breach of contract

(Butnaruv.Ford Motor Co., 84 S.W.3d 198, 211 (Tex. 2002)).

The most common equitable remedies include:

• Injunctive relief, in limited circumstances (Butnaru, 84

S.W.3d at 204, 211).

• Rescission (Humphreyv.Camelot Retirement Cmty., 893

S.W.2d 55, 59 (Tex. App.—Corpus Christi 1994, no writ)).

• Reformation (Howardv.INA Cty. Mut. Ins., 933 S.W.2d

212, 219 (Tex. App—Dallas 1996, writ denied)).

• Speciﬁc performance (Pathﬁnder Oil & Gas, Inc.v.Great

W. Drilling, Ltd., 574 S.W.3d 882, 887 (Tex. 2019)).

A party to a contract may also seek a declaratory

judgment asking the court to rule on the construction or

validity of the contract or on the rights, status, or legal

relations of the parties (Tex. Civ. Prac. & Rem. Code

Ann.§§37.003 and 37.004(a)).

Defenses to Breach of Contract

19. Identify common afﬁrmative defenses

to a breach of contract action that your

jurisdiction recognizes.

Under Texas law, defenses to a breach of contract action

typically focus on formation of contract or the alleged breach,

as well as defenses to damages and procedural defenses.

Defenses to Contract Formation

Under Texas law, a defendant may assert the following

afﬁrmative defenses to the formation of a contract:

Contract Basics for Litigators: Texas

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• Duress.

• Economic duress.

• Fraudulent inducement.

• Statute of frauds (Tex. Bus. & Com. Code Ann.§26.01

and see Question 2 and Question 3).

• Illegal purpose.

• Indeﬁniteness.

• Payment.

(Tex. R. Civ. P. 94.)

• Lack of capacity, due to infancy (Tex. Civ. Prac. & Rem.

Code Ann.§129.001) (18 is the age of majority in Texas)

or mental deﬁciency or illness.

• Mistake, mutual or unilateral.

• Undue inﬂuence.

• Unclean hands (where the plaintiff seeks equitable

relief).

• Unconscionability.

For more information on each of these and other defenses,

including procedural defenses, see Breach of Contract

Defenses Checklist (TX) and State Q&A, Breach of

Contract Defenses (TX).

Defenses to Breach

Under Texas law, a defendant may assert the following

afﬁrmative defenses to the plaintiff’s claims that it

breached the contract:

• Accord and satisfaction.

• Equitable estoppel.

• Failure of consideration (Question 1).

• Payment.

• Waiver.

(Tex. R. Civ. P. 94.)

• Ambiguity (Question 5).

• Anticipatory breach.

• Implied covenant of good faith and fair dealing (when a

special relationship exists between the parties).

• Failure of conditions precedent (Tex. R. Civ. P. 54).

• Impossibility (or impracticality) of performance.

• Modiﬁcation (Question 7).

• Novation (Question 8).

• Ratiﬁcation.

• Unclean hands (where the plaintiff seeks equitable relief).

For more information on each of these and other defenses,

including procedural defenses, see Breach of Contract

Defenses Checklist (TX) and State Q&A, Breach of

Contract Defenses (TX).

Defenses to Damages

• Failure to mitigate damages, if the contract does not

eliminate the duty to mitigate.

• Duplicative damages or improper double recovery.

• Damages that are unavailable, such as punitive damages.

• Damages are superseded by a liquidated damages clause.

• The plaintiff cannot prove damages because they are,

for example:

– speculative or contingent;

– not directly traceable to the breach;

– too remote;

– the result of other intervening causes; or

– damages that were not contemplated by the parties

when they made the contract.

For more information on each of these and other defenses,

including procedural defenses, see Breach of Contract

Defenses Checklist (TX) and State Q&A, Breach of

Contract Defenses (TX).