To be enforceable, contract requires agreement on material terms

ESSENTIAL MATERIAL TERMS MUST BE SPECIFIED FOR CONTRACT TO BE ENFORCEABLE - RIGHTS AND OBLIGATIONS OF PARTIES MUST BE CLEARLY DEFINED FOR COURT TO ENFORCE CONTRACT
  

To be enforceable, a contract must be sufficiently definite in its terms that a court can understand what the promisor undertook. T. O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). The material terms of the contract must be agreed on before a court can enforce it. Id.

If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex. App.--San Antonio 1989, no writ).

A lack of definiteness in an agreement may concern various elements, including time of performance, price to be paid, work to be done, or service to be done. Gannon v. Baker, 830 S.W.2d 706, 709 (Tex. App.--Houston [1st Dist.] 1992, writ denied); Terrell v. Nelson Puett Mortgage Co., 511 S.W.2d 366, 369 (Tex. Civ. App.--Austin 1974, writ ref'd n.r.e.).

Whether an agreement has all the essential terms to be an enforceable agreement is a question of law. See America's Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 625 (Tex. App.--San Antonio 1996, writ denied). Each contract should be considered separately to determine its material terms. See T. O. Stanley Boot Co., 847 S.W.2d at 221 (citing Bridewell v. Pritchett, 562 S.W.2d 956, 958 (Tex. Civ. App.--Fort Worth 1978, writ ref'd n.r.e.)).

AGREEMENT TO AGREE [on unspecified contract terms yet to be determined] NOT ENFORCEABLE

To be enforceable, an agreement to enter into a future contract must specify all its material and essential terms, leaving none to be agreed on as the result of future negotiations. See Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121, 135 (Tex. App.--Waco 2005, pet. denied) (citing Parker Chiropractic Research Found. v. Fairmont Dallas Hotel Co., 500 S.W.2d 196, 201 (Tex. Civ. App.--Dallas 1973, no writ)). When an essential term is left open for future negotiation, the parties have nothing more than an unenforceable "agreement to agree." See Oakrock Exploration Co. v. Killam, 87 S.W.3d 685, 690 (Tex. App.--San Antonio 2002, pet. denied).

SOURCE: Austin Court of Appeals - 03-10-00656-CV - 5/11/11

How do parties enter into a legally binding arbitration agreement?

ELEMENTS OF ARBITRATION AGREEMENT

The elements of a valid arbitration agreement are: (1) an offer; (2) acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Advantage Physical Therapy, Inc. v. Cruse, 165 S.W.3d 21, 24 (Tex. App.-Houston [14th Dist.] 2005, no pet.). 
   
The term "meeting of the minds" refers to the parties' mutual understanding and assent to the expression of their agreement. Principal Life Ins. Co. v. Revalen Dev., LLC, 358 S.W.3d 451, 454 (Tex. App.-Dallas 2012, pet. denied). Contracts require mutual assent to be enforceable. Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007) (per curiam). Evidence of mutual assent in written contracts generally consists of signatures of the parties and delivery with the intent to bind. Id. Whether the parties reached an agreement is a question of fact. Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.-Houston [14th Dist.] 2010, pet. denied).

 

Arbitration clauses generally do not require mutuality of obligation so long as adequate consideration supports the underlying contract. In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 233 (Tex. 2008) (orig. proceeding) (per curiam). When an arbitration agreement is part of a larger, underlying contract, the remainder of the contract may constitute sufficient consideration for the arbitration provision. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006) (orig. proceeding). 
   
Stand-alone arbitration agreements require binding promises from both sides as they are the only consideration rendered to create a contract. In re Advance PCS Health L.P., 172 S.W.3d 603, 607 (Tex. 2005) (orig. proceeding) (per curiam). 
  
A promise is illusory if it does not bind the promisor, as when the promisor retains the option to discontinue performance. In re 24R, Inc., 324 S.W.3d 564, 567 (2010) (orig. proceeding) (per curiam). When illusory promises are all that support a purported bilateral contract, there is no mutuality of obligation and, therefore, no contract. Id. An arbitration agreement is not illusory unless one party can avoid its promise to arbitrate by amending the provision or terminating it altogether. Id.

SOURCE: HOUSTON COURT OF APPEALS - 14-12-00263-CV – 2/2/2013 

ELEMENTS OF CONTRACT-FORMATION GENERALLY  

To create an enforceable contract, there must be (1) an offer, (2) acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. See Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.-Houston [14th Dist.] 2010, pet. denied). "Meeting of the minds" describes the mutual understanding and assent to the agreement regarding the subject matter and the essential terms of the contract. See Potcinske v. McDonald Property Investments, Ltd., 245 S.W.3d 526, 530 (Tex. App.-Houston [1st Dist.] 2007, no pet.) Mutual assent concerning material, essential terms is a prerequisite to formation of a binding contract. See id.

Contract Modification must also be supported by consideration

Modification of contract terms also requires consideration, just as the original contract

CONTRACT MODIFICATION

"A modification must satisfy the elements of a contract: a meeting of the minds supported by consideration." Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986); see also Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 314 (Tex. App.-Houston [14th Dist.] 2003, pet. denied).

Consideration is defined as "either a benefit to the promisor or a loss or detriment to the promisee." N. Natural Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 607 (Tex. 1998) (quoting Receiver for Citizen's Nat'l Assurance Co. v. Hatley, 852 S.W.2d 68, 71 (Tex. App.-Austin 1993, no writ)).

SOURCE: HOUSTON COURT OF APPEALS - No. 01-11-00800-CV – 2/28/2013
 

To be legally binding, agreement can't be wishy-washy about what is agreed

Agreement to agree (in the future) does not make for a judicially enforceable contract.

ELEMENTS OF CONTRACT - PRECISION IN DEFINING TERMS AND OBLIGATIONS IS REQUIRED

The elements of a valid and enforceable contract are: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Hubbard v. Shankle, 138 S.W.3d 474, 481 (Tex. App.-Fort Worth 2004, pet. denied).

 

The necessary elements of both written and oral contracts are the same and must be present for a contract to be binding. Id. A contract's material terms must be sufficiently definite and reasonably certain to both parties. Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000).

 

Accordingly, all essential terms of the agreement must be agreed upon before a contract may be enforced by the courts. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). If the terms of an alleged contract are so indefinite that it is impossible for the courts to determine the rights and obligations of the parties, it is not an enforceable agreement. Shin-Con Dev. Corp. v. I.P. Invs., Ltd., 270 S.W.3d 759, 765 (Tex. App.-Dallas 2008, pet. denied). Parties may agree on some terms sufficient to create a contract, leaving other provisions for later negotiation. See Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 555 (Tex. 1972); Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121, 133 (Tex. App.-Waco 2005, pet. denied). When an agreement leaves material terms open for future adjustment and agreement that never occur, it is not binding upon the parties and merely constitutes an agreement to agree. See Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846; Ski River, 167 S.W.3d at 134.

SOURCE: DALLAS COURT OF APPEALS - No. 05-12-00653-CV – 2/21/2013

Breach of oral contract vs agreement in writing: is there a difference?

ORAL CONTRACT - CONTRACT IN WRITING
SAME ELEMENTS (though different evidence may be needed as proof)

The elements of a breach of contract claim are: (1) a valid contract, (2) plaintiff performed or tendered performance, (3) defendant breached the contract, and (4) plaintiff was damaged as a result of the breach. Critchfield v. Smith, 151 S.W.3d 225, 233 (Tex. App.-Tyler 2004, pet. denied); Richter v. Wagner Oil Co., 90 S.W.3d 890, 898 (Tex. App.-San Antonio 2002, no pet.).
The following elements are required for the formation of a valid and binding contract: (1) an offer, (2) acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. Cessna Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465 (Tex. App.-Dallas 2006, pet. denied) ; Hubbard v. Shankle, 138 S.W.3d 474, 481 (Tex. App.-Fort Worth 2004, pet. denied).

The elements of written and oral contracts are the same and must be present for a contract to be binding. Critchfield, 151 S.W.3d at 233. In determining the existence of an oral contract, the court looks to the communications between the parties and to the acts and circumstances surrounding the communications. Cessna Aircraft Co., 213 S.W.3d at 465.

SOURCE: Dallas Court of Appeals - 05-10-00041-CV - 7/29/11 (evidence found legally and factually sufficient to support claim for breach of oral contract)

No enforceable contract when essential terms are missing

DEFINITIVENESS REQUIRED  

Breach of contract claim may fail if alleged contract does not include agreement on essential terms Whether an agreement has all the essential terms to be an enforceable agreement is a question of law. See America's Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 625 (Tex. App.-San Antonio 1996, writ denied). Each contract should be considered separately to determine its material terms. See T. O. Stanley Boot Co., 847 S.W.2d at 221 (citing Bridewell v. Pritchett, 562 S.W.2d 956, 958 (Tex. Civ. App.-Fort Worth 1978, writ ref'd n.r.e.)).
 
To be enforceable, a contract must be sufficiently definite in its terms that a court can understand what the promisor undertook. T. O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). The material terms of the contract must be agreed on before a court can enforce it. Id. If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex. App.-San Antonio 1989, no writ).
 
A lack of definiteness in an agreement may concern various elements, including time of performance, price to be paid, work to be done, or service to be done. Gannon v. Baker, 830 S.W.2d 706, 709 (Tex. App.-Houston [1st Dist.] 1992, writ denied); Terrell v. Nelson Puett Mortgage Co., 511 S.W.2d 366, 369 (Tex. Civ. enApp.-Austin 1974, writ ref'd n.r.e.).
 
SOURCE: DKH Homes, LP v. Kilgo, No. 03-10-00656-CV - 5/11/11 (no contract formed, essential terms missing) ("We conclude that the Agreement at issue does not include terms essential to an agreement to construct a house.") 

RELATED LEGAL TERMS: enforceability of contract, challenge to contract validity, contention that there is no contract, lack of meeting of the minds on essential terms, contractual rights and duties of the parties not sufficiently defined 

OLDER CASELAW CLIPS ON SUFFICIENCY OF CONTRACTUAL TERMS

Mere Agreement to Agree on some terms yet to be specified is not enough 

It is established law that a writing need not have all the stipulations between the parties to be considered a contract. Osborn v. Moore, 247 S.W.2d 498 (Tex. 1923). Rather, a contract need only have the essential elements. Id. A contract can also exist even though there are terms on which the parties have not agreed and which they expect further negotiation. Scott v. Ingle Bros. Pacific Inc., 489 S.W.2d 554, 555 (Tex. 1972). Nevertheless, when an essential term is left open for future negotiation, there is no binding contract. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). An agreement to make a future agreement is enforceable only if it contains all essential terms. Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000). Thus, to decide whether the agreement is enforceable, the Court must first determine what the material elements of the contract are, and then whether those elements are included in the Letter Agreement. 

What terms are material may vary depending on the type of contract, subject matter 

 Contracts must be read separately to determine the necessary material terms. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992) (citing Bridewell v. Pritchett, 562 S.W.2d 956, 958 (Tex. Civ. App.Fort Worth 1978)). Material terms are those that the parties would reasonably regard as vitally important elements of their bargain. Potcinske v. McDonald Property Investments, Ltd., 245 S.W.3d 525, 531 (Tex. App.-Houston [1st Dist.] 2007) (citing Neeley v. Bankers Trust Co., 757 F.2d 621, 628 (5th Cir. 1985)). Additionally, a contract must define its essential terms with enough precision to enable the court to determine the obligations of the parties. Central Texas Micrographics v. Leal, 908 S.W.2d 292, 296-297 (Tex. App.-San Antonio 1995) (citing Weitzman v. Steinberg, 638 S.W.2d 171, 175 (Tex. App.-Dallas 1982)). It is well established that the terms of an oral contract must be clear, certain, and definite. Haden Co. v. Riggs, 84 S.W.2d 789, 798 (Tex.Civ.App.—Galveston 1935), affd, 127 Tex. 314, 94 S.W.2d 152 (1936). If an alleged agreement is so indefinite that it is impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (1944); University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex.App.—San Antonio 1989, no writ). A lack of definiteness in an agreement may concern the time of performance, the price to be paid, the work to be done, the service to be rendered or the property to be transferred. University Nat'l Bank, 773 S.W.2d at 710 With respect to an oral agreement to transfer stock, terms must state the specific quantity of shares and the specific price in order to be considered "clear, certain, and definite." Consolidated Petroleum Indus, v. Jacobs, 648 S.W.2d 363, 366 (Tex.App.— Eastland 1983, writ ref'd n.r.e.). Courts are barred from rewriting a contract for the parties, but if a provision is too vague to be enforced, courts will not enforce it. See John Wood USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 21 (Tex.App.-Houston [1st Dist.] 2000, pet. denied); University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex.App.-San Antonio 1989, no writ) ("If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract.") If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (1944); Weitzman v. Steinberg, 638 S.W.2d 171, 175 (Tex.App. —Dallas 1982, no writ). A lack of definiteness in an agreement may concern the time of performance, the price to be paid, the work to be done, the service to be rendered or the property to be transferred. Terrell v. Nelson Puett Mortgage Co., 511 S.W.2d 366, 369 (Tex.Civ.App.—Austin 1974, writ ref'd n.r.e.). There is no authority to ask a jury to supply an essential term in the contract which the parties were unable to complete by mutual agreement. Weitzman, 638 S.W.2d at 175.

Contract formation and elements to prove existence of a valid contract

EXISTENCE OF A VALID CONTRACT UNDER TEXAS LAW 

The essential elements of a breach of contract claim are (1) the existence of a valid contract, (2) the plaintiff performed or tendered performance, (3) the defendant breached the contract, and (4) the plaintiff was damaged as a result of the breach. Winchek v. Am. Express Travel Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.—Houston [1st Dist.] 2007, no pet.).

Parties form a binding contract when there is (1) an offer, (2) an acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) consent by each party to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. Wal-Mart Stores, Inc. v. Lopez, 93 S.W.3d 548, 555-56 (Tex. App.—Houston [14th Dist.] 2002, no pet.).

For an agreement to be enforceable, there must be a meeting of the minds with respect to its subject matter and essential terms. Id. at 556. A “meeting of the minds” is a mutual understanding and assent to the expression of the parties’ agreement. See Weynand v. Weynand, 990 S.W.2d 843, 846 (Tex. App.—Dallas 1999, pet. denied). To determine whether there was an offer and acceptance, and therefore a “meeting of the minds,” courts use an objective standard; they consider what the parties did and said, not the parties’ subjective states of mind. See Komet v. Graves, 40 S.W.3d 596, 601 (Tex. App.—San Antonio 2001, no pet.).

SOURCE: 14-08-01098-CV (3/16/10) (Fourteenth Court of Appeals in Downtown Houston Texas)

Elements of contract for sale

Three essential elements of a contract for sale are “(1) the thing sold, which is the object of the contract; (2) the consideration or price to be paid for the thing sold; and (3) the consent of the parties to exchange the thing for the price.” John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 20 (Tex. App.—Houston [1st Dist.] 2000, pet. denied). SOURCE: 01-09-00030-CV Stewart & Stevenson, L.L.C. v. Galveston Party Boats, Inc. (Tex.App.- Houston [1st Dist.] Nov. 5,2009)

Effect of Absence of MATERIAL TERM from CONTRACT on enforceability

OMISSION OF MATERIAL TERM WOULD RENDER CONTRACT UNENFORCEABLE
 
A contract that lacks a material term is not an enforceable contract. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992) (stating that "[i] n order to be legally binding, a contract must be sufficiently definite in its terms so that a court can understand what the promisor undertook" and that "[w]here an essential term is open for future negotiation, there is no binding contract"); Sadeghi v. Gang, 270 S.W.3d 773, 776 (Tex. App.-Dallas 2008, no pet.) ("If a contract is not clear and certain as to all essential terms, it will fail for indefiniteness."); Miga v. Jensen, 25 S.W.3d 370, 376 (Tex. App.-Fort Worth 2000), aff'd in part and rev'd in part, 96 S.W.3d 207 (Tex. 2002). Thus, a party may defend a breach of contract action by asserting that the contract on which the claim is based is not enforceable as a matter of law and therefore cannot support a breach of contract action. See T.O. Stanley Boot Co., 847 S.W.2d at 221-22.
 
NATURE OF THE LEGAL ARGUMENT THAT ESSENTIAL TERMS IS MISSING FROM THE CONTRACT SUED ON
 
An assertion that the contract lacked a material term does not establish an independent reason why a plaintiff should not recover and is therefore not an affirmative defense. See Phillips v. Phillips, 820 S.W.2d 785, 791 (Tex. 1991) (stating that affirmative defense does not rebut facts asserted by plaintiff but rather seeks to establish independent reason why plaintiff should not recover).
 
QUESTION OF LAW NOT FOR THE JURY TO DECIDE

 [T]he question of whether the contract contained all essential terms for it to be enforceable is a question of law. Beal Bank, S.S.B., 124 S.W.3d at 654 n.8; Am.'s Favorite Chicken Co., 929 S.W.2d at 622. [T]he jury's answer to the question is therefore not determinative. Alcorn v. Brown, 536 S.W.2d 80, 82 (Tex. Civ. App- Fort Worth 1976, writ ref'd n.r.e.); see also Se. Pipe Line Co., Inc. v. Tichacek, 997 S.W.2d 166, 172 (Tex. 1999) (noting that a jury's answer to a question may be disregarded if question calls for a finding on a question of law). Alcorn, 536 S.W.2d at 82 (stating that trial court may disregard jury's answer to erroneously submitted question of law). 
   
SOURCE: 02-07-00355-CV (Fort Worth Court of Appeals) (5/28/09, pet. denied 10/16/09) (finding that the contract for sale/purchase of interest in house boat at issue contained all the material terms necessary for it to be enforceable).