Can a Texas state officer or employee bind the state with an oral contract?

Texas AG Opinion JC-0132: Can State Officers and Employees Bind Texas with Oral Contracts?

Plain-English summary

A House committee chair asked the Attorney General, in the abstract, whether state officers and employees can enter into oral contracts on behalf of the State of Texas. Because the question named no specific contract, officer, or purpose, the opinion laid out the general legal principles. Its overall message: the authority to bind the state by oral contract is severely restricted, though not impossible.

The opinion identified several limits. First and most important, no one can make a contract binding on the state unless the constitution or a statute authorizes it, and that must be actual authority, not just apparent authority. In private dealings, a principal can be bound by an agent who only appears to have authority, but everyone dealing with state officers is charged with knowing the limits of their authority, so the state is not bound merely because an officer looked authorized. The legislature usually grants contracting authority to agency governing boards and officers, and sometimes lets boards delegate it (the opinion gave examples from the Education Code and Government Code).

Second, the legislature controls the subjects, procedures, and policy of state contracts. While an oral contract is normally as binding as a written one, statutes often require particular contracts to be in writing (the opinion cited a Health and Safety Code construction-contract example and competitive-bidding statutes), and even where writing is not required, procurement rules about invoices and sealed bids tend to generate paperwork. Third, the Statute of Frauds makes certain contracts (such as sales of goods for $500 or more, agreements not performable within a year, and real-estate sales) unenforceable unless written and signed. Finally, sovereign immunity means that even a validly formed oral contract cannot be enforced against the state in court unless the legislature waives immunity from suit and consents to be sued; the state waives immunity from liability when it contracts, but not immunity from suit. Whether any particular contract binds the state, the opinion concluded, depends on the facts and the governing law.

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Can a Texas state employee bind the state with a handshake deal?
Only in rare circumstances. The opinion concluded a state officer or employee cannot bind the state by any contract unless the constitution or a statute gives them actual authority, and even then a writing requirement or the Statute of Frauds may apply.

Is an oral state contract automatically invalid?
No. The opinion said that if the officer or employee is authorized and no law requires the contract to be in writing, an oral contract is just as valid as a written one.

Does it help that an official appeared to have authority?
No. The opinion explained that apparent authority is not enough to bind the state; people dealing with state officers are charged with knowing the limits of their authority and must determine at their peril whether a contract is within the officer's power.

When must a state contract be in writing?
The opinion noted that many statutes require specific contracts (like certain construction or competitively bid contracts) to be written, and that the Statute of Frauds requires a writing for things like sales of goods worth $500 or more, agreements not to be performed within a year, and sales of real estate.

If the state breaks an oral contract, can you sue?
Not without consent. The opinion explained that sovereign immunity bars suit against the state unless the legislature waives immunity from suit; the state waives immunity from liability by contracting, but a person still needs legislative consent to sue for breach.

Background and statutory framework

The opinion built its analysis on Texas contract and sovereign-immunity case law. The actual-authority requirement rests on State v. Ragland Clinic-Hosp. and Vitapro Foods, Inc. v. State, with the apparent-authority contrast drawn from Moody v. E.M.C. Servs., Inc. The legislature's control over state-contract subjects and procedure is supported by Texas Nat'l Guard Armory Bd., and the baseline rule that oral contracts are generally enforceable comes from Ward v. Strickland; delegation examples come from section 111.34 of the Education Code (University of Houston board) and section 2103.064 of the Government Code (Texas Transportation Commission).

For writing requirements, the opinion cited section 402.187(a) of the Health and Safety Code (Low-Level Radioactive Waste Disposal Authority construction contracts), competitive-bidding provisions in section 2156.125 of the Government Code and section 223.156 of the Transportation Code, and procurement provisions in sections 2155.381 and 2156.005 of the Government Code. The Statute of Frauds discussion drew on Davis v. Crockett and the Business and Commerce Code (sections 2.201 and 26.01). The sovereign-immunity analysis, distinguishing immunity from suit and immunity from liability, relied on Federal Sign v. Texas S. Univ.

Citations

Statutes:

• Tex. Educ. Code Ann. § 111.34 (Vernon 1991)
• Tex. Gov't Code Ann. §§ 2103.064 (Vernon Supp. 1999); 2155.381, 2156.005, 2156.125 (Vernon 1999)
• Tex. Transp. Code Ann. § 223.156 (Vernon 1999)
• Tex. Health & Safety Code Ann. § 402.187(a) (Vernon 1992)
• Tex. Bus. & Com. Code Ann. §§ 2.201 (Vernon 1994), 26.01

Cases:

• State v. Ragland Clinic-Hosp., 159 S.W.2d 105 (Tex. 1942)
• Vitapro Foods, Inc. v. State, 969 S.W.2d 84 (Tex. App.-Texarkana 1998, pet. granted)
• Moody v. E.M.C. Servs., Inc., 828 S.W.2d 237 (Tex. App.-Houston [14th Dist.] 1992, writ denied)
• Texas Nat'l Guard Armory Bd., 126 S.W.2d at 637
• Ward v. Strickland, 177 S.W.2d 79 (Tex. Civ. App.-Dallas 1943, writ ref'd)
• Davis v. Crockett, 398 S.W.2d 302 (Tex. Civ. App.-Dallas 1965, no writ)
• Federal Sign v. Texas S. Univ., 951 S.W.2d 401 (Tex. 1997)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0132
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1999/jc0132.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL, STATE OF TEXAS
JOHN CORNYN

October 22, 1999

The Honorable Ron Wilson
Chair, Licensing and Administrative Procedures Committee
Texas House of Representatives
P.O. Box 2910
Austin, Texas 78768-2910

Opinion No. JC-0132

Re: Whether state officers and employees may enter into oral contracts on behalf of the state (RQ-0075-JC)

Dear Representative Wilson:

You ask about the authority of state officers and employees to enter into oral contracts on behalf of the State of Texas. Because you do not ask about a contract for any specific purpose or about any specific state officer or employee, we provide you with the general legal principles on the authority of state agents to bind the state with oral contracts. On the whole, we think such authority is severely restricted. However, whether a state officer or employee has authority to enter into an oral contract in any particular circumstance must be determined based on the facts surrounding the contract formation and the law governing it.

There are numerous limitations on the contracting authority of state officers and employees pertinent to your inquiry. First and foremost, no one has the authority to make a contract binding on the state unless authorized to do so by the constitution or by statute. See State v. Ragland Clinic-Hosp., 159 S.W.2d 105, 106 (Tex. 1942); Vitapro Foods, Inc. v. State, 969 S.W.2d 84, 88 (Tex. App.-Texarkana 1998, pet. granted). Normally, authority to bind the state is given by the legislature to entities such as the governing boards of state agencies and to state officers, rather than to employees. In some instances, contracting authority granted to a governing board may be delegated to other officers or employees. For example, the Education Code allows the University of Houston board of trustees to delegate its contracting authority: "All contracts of the university shall be approved by a majority of the board. However, the board is authorized to adopt reasonable rules that delegate to the president or his authorized representatives the authority to negotiate, approve, and execute contracts." TEX. EDUC. CODE ANN. § 111.34 (Vernon 1991). Similarly, under the Government Code, "[t]he Texas Transportation Commission may delegate to one or more employees of the Texas Department of Transportation the authority to approve vouchers for expenditures from the state highway fund and the authority to approve and sign contracts and other documents." TEX. GOV'T CODE ANN. § 2103.064 (Vernon Supp. 1999). All state officers and employees are potentially able to bind the state, but to do so they must be able to point to some constitutional or statutory authority for their actions.

Apparent authority is not enough to make an obligation binding upon the state; an officer or employee must have actual authority to do so. Vitapro, 969 S.W.2d at 88. In a contract between private parties, an agent who has no actual authority to bind his principal can nevertheless bind the principal if the principal leads the other party to believe that the agent had the authority to act on the principal's behalf. See Moody v. E.M.C. Servs., Inc., 828 S.W.2d 237, 241 (Tex. App.-Houston [14th Dist.] 1992, writ denied). In such a case, the principal is estopped from claiming that the agent had no authority to act on the principal's behalf. Id. But the powers of state officers are set by law and all persons dealing with them are charged with notice of the limits of their authority and are bound at their peril to ascertain whether a contemplated contract is within the power conferred. Ragland Clinic-Hosp., 159 S.W.2d at 107; Vitapro, 969 S.W.2d at 88. Thus, even if a state officer or employee appears to have authority to bind the state, the state will not be bound unless the officer or employee had actual authority to bind the state.

Second, the subjects of state contracts, the procedure for entering into contracts, and the general policy relating to contracts are all within the power of the Legislature to establish. See Texas Nat'l Guard Armory Bd., 126 S.W.2d at 637. Although an oral contract is normally just as binding and enforceable as a written contract, see Ward v. Strickland, 177 S.W.2d 79, 82 (Tex. Civ. App.-Dallas 1943, writ ref'd), the authority of a person or entity to enter into an oral contract on behalf of the state may be restricted by the constitution or by statute or regulation.

While no general state law prohibits oral contracts from binding the state, it is not uncommon for a statute that authorizes a contract to require the contract to be in writing. For example, the Health and Safety Code authorizes the Low-Level Radioactive Waste Disposal Authority to enter into certain construction contracts, but requires that any contract be in writing: "A construction contract must be in writing and signed by a representative of the authority and the contractor." TEX. HEALTH & SAFETY CODE ANN. § 402.187(a) (Vernon 1992). Various competitive bidding statutes similarly require a state agency to make a written award of a contract. See, e.g., TEX. GOV'T CODE ANN. § 2156.125 (Vernon 1999); TEX. TRANSP. CODE ANN. § 223.156 (Vernon 1999). Even where a statute does not expressly require a contract to be in writing, other requirements may, as a practical matter, involve some type of paperwork or other written memorialization of the agreement. State procurement statutes, for example, include such requirements as the submission of invoices and sealed bids for goods or services to be provided to the state. See, e.g., TEX. GOV'T CODE ANN. §§ 2155.381, 2156.005 (Vernon 1999).

Furthermore, a contract may be subject to the Statute of Frauds. If so, it is not enforceable unless it is in writing and signed. The Statute of Frauds refers collectively to laws that are designed to prevent fraud and perjury in certain types of transactions by requiring the agreement of parties to be evidenced by a writing signed by them. See Davis v. Crockett, 398 S.W.2d 302, 305 (Tex. Civ. App.-Dallas 1965, no writ). Contracts subject to the Statute of Frauds include a contract for the sale of goods for the price of $500 or more, see TEX. BUS. & COM. CODE ANN. § 2.201 (Vernon 1994), an agreement that is not to be performed within one year, id. § 26.01, and a contract for the sale of real estate, id., among others.

Lastly, although a state officer or employee may, assuming constitutional and statutory authority to do so, enter into an oral contract, the contract may not be enforced against the state in court unless the state, through the legislature, waives sovereign immunity and consents to be sued. The doctrine of sovereign immunity embraces two principles: immunity from liability and immunity from suit. See Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 405 (Tex. 1997). Immunity from suit bars a suit against the state unless the state expressly gives its consent to the suit, while immunity from liability protects the state from judgments even if the state has expressly consented to be sued. Id. When the state contracts with a private citizen, the state waives its immunity from liability. Id. at 405-06. The state does not, however, waive its immunity from suit. Id. at 408. Thus, while the state is liable on contracts made for its benefit as if it were a private person, a private person must have legislative consent to sue the state on a breach of contract claim.

In sum, while we think that the circumstances are rare under which a state officer or employee could bind the state with a purely oral contract, the possibility nevertheless exists. Provided the officer or employee is authorized to make the contract on behalf of the state, an oral contract is as valid as a written contract absent a requirement that the contract be in writing. Such a contract may not be enforced against the state in court, however, unless the state waives sovereign immunity and consents to be sued. Whether any particular contract, oral or written, is binding and enforceable upon the state must be determined based on the facts surrounding the contract and the law governing it.

SUMMARY

A state officer or employee may not enter into a contract that is binding upon the State of Texas unless authorized to do so by the Texas Constitution or by statute. Provided the officer or employee is authorized to make the contract on behalf of the state, and provided any constitutional, statutory, and regulatory requirements are met, an oral contract is as valid as a written contract absent a requirement that the contract be in writing. Such a contract may not be enforced against the state, however, unless the state waives sovereign immunity and consents to be sued.

Yours very truly,

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Barbara Griffin
Assistant Attorney General - Opinion Committee