    OFPKE   OF THE .4TTORNLY   GENERAL.   STATE OF TEMS

    JOHN     CORNYN




                                                   October 22, 1999



The Honorable Ron Wilson                                  Opinion No. K-0132
Chair, Licensing and Administrative
 Procedures Committee                                     Re: Whether state officers and employees may enter
Texas House of Representatives                            into oral contracts on behalf of the state
P.O. Box 2910                                             (RQ-0075-K)
Austin, Texas 78768-2910

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 Y. 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 offricers, 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 ofthe 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. 5 111.34 (Vernon 1991). Similarly, under the
Government Code, “[t]he Texas Transportation Commission may delegate to oneormore 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. 5 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.
The Honorable Ron Wilson - Page 2                  (JC-0132)




        Apparent authority is not enough to make an obligation binding upon the state; an offtcer 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 ofthe Legislature to establish. See Texas
Nat ‘ZGuardArmory Bd., 126 S.W.2d at 637. Although an oral contract is normally just as binding
and enforceable as a written contract, see Ward Y. 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&SAFETYCODEANN. 3 402.187(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’TCODE
ANN. 5 2156.125 (Vernon 1999); TEX.TRANSP.CODEANN. 5 223.156 (Vernon 1999). Evenwhere
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’TCODEANN.
$3 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 requiting 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 ofFrauds include a contract for the sale
of goods for the price of $500 or more, see TEX.Bus. & COM.CODEANN. 5 2.201 (Vernon 1994),
an agreement that is not to be performed within one year, id. 5 26.01, and a contract for the sale of
real estate, id., among others.
The Honorable Ron Wilson - Page 3                  (JC-0132)




          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 Corn 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.
The Honorable Ron Wilson - Page 4               (JC-0132)




                                       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.




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                                                     CTlLT

                                              JOHN     CORNYN
                                              Attorney General of Texas


ANDY TAYLOR
First Assistant Attorney General

CLARK RENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Barbara Griffin
Assistant Attorney General - Opinion Committee
