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STATUTE OF FRAUDS: LOAN OF MONEY IN EXCESS OF $50,O00
The Statute of Frauds Relating to Loan Agreements-Section 26.02
In 1989, the legislature enacted section 26.02-a specific statute of frauds for loan agreements involving loans
exceeding $50,000. See Tex. Bus. & Com. Code Ann. § 26.02. Under this statue, a loan agreement is not
enforceable unless the agreement is in writing and signed by the party to be bound or by that party's authorized
representative. Id. § 26.02(b). Section 26.02 defines "loan agreement" broadly. Subject to exceptions not
applicable here, a "loan agreement" means one or more promises, promissory notes, agreements,
undertakings, security agreements, deeds of trust or other documents, or commitments, or any combination of
those actions or documents, pursuant to which a financial institution loans or delays repayment of or agrees to
loan or delay repayment of money, goods, or another thing of value or to otherwise extend credit or make a
financial accommodation. Id. § 26.02(a)(2). Unlike the traditional statute of frauds (section 26.01), section 26.02
requires the loan agreement itself to be in writing; a memorandum of the agreement does not satisfy section
26.02. Cf. id. §§ 26.01(a) (agreement unenforceable unless promise or agreement, or a memorandum of it, is in
writing and signed), 26.02(b) (agreement unenforceable unless the agreement is in writing and signed).
BANK OF TEXAS, NA v. Gaubert, Tex: Court of Appeals, 05-08-01080-CV 286 SW 3d 546 5th Dist., Dallas 2009
HOUSTON CASE LAW RE: STATUTE OF FRAUDS AS TO LOAN AGREEMENTS
To satisfy the Statute of Frauds, all loan agreements involving amounts exceeding $50,000 must be in writing.
TEX. BUS. & COM.CODE ANN. § 26.02 (Vernon 2002). Specifically, "there must be a written memorandum which
is complete within itself in every material detail and which contains all of the essential elements of the agreement
so that the contract can be ascertained from the writings without resorting to oral testimony." Cohen v.
McCutchin, 565 S.W.2d 230, 232 (Tex. 1978).
The written memorandum must, within itself or by reference to other writings and without resort to parol
evidence, contain all the elements of a valid contract, including an identification of both the subject matter of the
contract and the parties to the contract. Dobson v. Metro Label Corp., 786 S.W.2d 63, 65 (Tex.App.-Dallas
1990, no writ).
In a contract to loan money, the material terms also include the amount to be loaned, the maturity date of the
loan, the interest rate, and the repayment terms. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d
218, 221 (Tex.1992).
inally, the agreement must be signed "by the party to be bound or by that party's authorized representative."
TEX. BUS. & COM.CODE ANN. § 26.02(b) (Vernon 2002).
[P]arties to a written contract that is within the provisions of the Statute of Frauds:
. . . may not by mere oral agreement alter one or more of the terms thereof and thus make a new Dracopoulas v. Rachal, 411 S.W.2d 719, 721 (Tex.1967) (quoting Robertson v. Melton, 131 Tex. 325, 115 S.W.
contract resting partly in writing and partly in parol, the reason for the rule being that, when such
alteration is made, part of the contract has to be proven by parol evidence, and the contract is thus
exposed to all the evils which the statute was intended to remedy.
2d 624 (1938)). But, a modification to a contract need not restate all the essential terms of the original 146
agreement. A modification alters only those terms of the original agreement to which it refers, leaving intact
those unmentioned portions of the original agreement that are not inconsistent with the modification. See
Boudreaux Civic Ass'n v. Cox, 882 S.W.2d 543, 547-48 (Tex.App.-Houston [1st Dist.] 1994, no writ) ("A
modification to a contract creates a new contract that includes the new, modified provisions and the unchanged
old provisions.") (emphasis added). Thus, if we construe the Repayment Agreement as a modification, terms not
addressed in the Repayment Agreement are supplied by the original Loan Documents. Because the original
Loan Documents supply essential terms missing from the Repayment Agreement, this construction arguably
supports the argument that the agreement satisfies the Statute of Frauds.
BACM-2001 San Felipe Road LP v. Trafalgar Holdings I Ltd 218 S.W.3d 137 (Tex.App.- Houston [14th Dist.]
Jan. 11, 2007)(Opinion by Justice Guzman) (commercial loans, repayment agreement, loan contract
modification agreements, breach of contract, statute of frauds)
REVERSED AND RENDERED: Opinion by Justice Guzman
(Before Justices Anderson, Hudson and Guzman)
14-05-00476-CV BACM-2001 San Felipe Road Limited Partnership Et Al v. Trafalgar Holdings I Ltd Et Al
Appeal from 133rd District Court of Harris County (Judge Lamar McCorkle)
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