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Contract terms take precedence over oral promises

On Behalf of | Oct 28, 2019 | Civil Litigation

Most Texas companies regularly rely on contracts to complete their transactions, and The Suster Law Group, PLLC, often advises clients about what they should include in these documents to protect themselves and their businesses. 

The negotiations between you and your clients, vendors and partners may be largely oral as you work out the terms of your contracts, and it may seem to stand to reason that these could carry some weight on their own. However, Forbes reports that a recent Texas Supreme Court decision would indicate that oral promises do not supersede the terms of a contract. 

A franchisee spoke repeatedly with a major car company about opening a dealership. Although the franchisee wanted to open the dealership in one town, he had plans to relocate to another town soon after and wanted to move his franchise at the same time. He allegedly expressed this to the company representative multiple times, and was assured that he would be able to make the move. 

When he was told that he could not open his dealership in the new location, he sued the company for fraudulent inducement and was awarded damages. The company appealed, and the appellate court reduced the damages but upheld the decision. 

When the case went before the Texas Supreme Court, however, the justices ruled that oral promises could not overturn the terms written in the contract. 

In order to prevent legal problems from arising, you may want to include all material representations in the contract. A merger clause may also be included that states that anything the parties offer or promise before signing the contract will not be valid unless it is included in the signed agreement.