Texas takes a business-friendly approach to contract law, but that doesn't mean anything goes. The state has specific statutory requirements for NDAs, strict rules on when non-competes are enforceable, minimal landlord-tenant regulation (which makes the lease itself more important), and its own framework for contractor classification.
This guide covers the Texas-specific rules for the contract types businesses use most.
Disclaimer: This is general information about Texas contract requirements, not legal advice. For specific situations, consult a Texas-licensed attorney.
NDAs in Texas
Texas NDA law is governed by the Texas Uniform Trade Secrets Act (TUTSA), Tex. Civ. Prac. & Rem. Code §§ 134A.001–134A.008. TUTSA provides the framework for trade secret protection and defines the remedies available for misappropriation.
What TUTSA Covers
TUTSA defines a trade secret broadly: information — including formulas, patterns, compilations, programs, devices, methods, techniques, or processes — that derives independent economic value from not being generally known and is the subject of reasonable efforts to maintain secrecy.
A Texas-compliant NDA should:
- Define confidential information with specificity — courts look at whether the NDA clearly identifies the information being protected
- Require reasonable protective measures — you must actually treat the information as confidential to enforce the NDA
- Include a reasonable duration — Texas courts evaluate duration on a case-by-case basis, but 2–5 years is standard for business information
- Specify Texas governing law and venue — Texas courts are experienced with TUTSA claims, and specifying a Texas venue avoids jurisdictional disputes
Remedies Under TUTSA
TUTSA provides several remedies that your NDA can reference:
- Injunctive relief — courts can issue injunctions to prevent actual or threatened misappropriation
- Damages — including actual losses, unjust enrichment, and in cases of willful and malicious misappropriation, exemplary damages up to twice the actual damages
- Attorney's fees — recoverable if misappropriation is willful and malicious, or if a claim of misappropriation is made in bad faith
Federal DTSA Notice
As with all states, Texas NDAs should include the Defend Trade Secrets Act immunity notice informing the receiving party of their rights to disclose trade secrets confidentially to government officials or attorneys for the purpose of reporting suspected legal violations.
Create a Texas-compliant NDA →
Non-Compete Agreements in Texas
Unlike California, Texas enforces non-compete agreements — but only when they meet specific statutory requirements under Texas Business and Commerce Code § 15.50.
The Two-Part Test
A Texas non-compete must satisfy both elements:
1. Ancillary to an otherwise enforceable agreement. The non-compete must be part of, or supported by, a separate enforceable agreement. Common qualifying agreements include:
- A confidentiality or NDA where the employer provides actual confidential information
- A training agreement where the employer provides specialized training
- A stock option or equity agreement with consideration
- A partnership or sale-of-business agreement
A non-compete that stands alone — without an underlying agreement that provides consideration beyond just employment — is unenforceable.
2. Reasonable in scope. The restrictions must be reasonable as to:
- Time — typically 1–2 years; restrictions beyond 2 years face increasing scrutiny
- Geographic area — must correspond to where the employer actually does business or where the employee had responsibilities
- Scope of activity — must be limited to activities that genuinely compete with the employer's business, not a blanket prohibition on working in the industry
Texas Courts Can Reform
A distinctive feature of Texas non-compete law is judicial reformation. If a court finds a non-compete overly broad, it can reform the agreement to make it reasonable rather than striking it down entirely. This means employers in Texas have a stronger position than in states where overbreadth voids the entire clause.
However, this doesn't mean you should draft overly broad restrictions. Courts have discretion in how they reform, and litigation is expensive. Draft narrowly from the start.
Physicians and Special Rules
Texas has specific requirements for physician non-competes (Tex. Bus. & Com. Code § 15.50(b)):
- Must allow the physician to buy out the non-compete at a reasonable price
- Must provide access to patient lists and medical records
- Must allow continuation of care for patients in acute treatment
Commercial Leases in Texas
Texas commercial lease law is largely governed by the contract itself. The state provides minimal statutory protections for commercial tenants, which means the lease document carries enormous weight.
No Rent Control
Texas Property Code § 214.902 prohibits municipalities from establishing rent control ordinances. This applies to both residential and commercial leases. There is no state-imposed cap on rent increases, and renewal terms are entirely a matter of negotiation.
Key Provisions Your Commercial Lease Must Address
Because statutory protections are minimal, a Texas commercial lease must be more comprehensive than in states with stronger tenant protections:
Triple net (NNN) terms. Many Texas commercial leases are NNN leases, requiring tenants to pay property taxes, insurance, and maintenance in addition to base rent. The lease must clearly define:
- Which expenses are passed through and how they're calculated
- Caps on annual increases in operating expenses
- Audit rights allowing the tenant to verify expense calculations
Property condition and repairs. Texas does not impose an implied warranty of habitability for commercial properties. The lease should specify:
- The condition of the premises at delivery
- Each party's maintenance and repair obligations
- Who pays for structural repairs vs. interior maintenance
- HVAC, plumbing, and electrical system responsibilities
Default and remedies. Define what constitutes default, cure periods, and available remedies:
- Notice requirements before the landlord can declare default
- Cure periods (typically 10–30 days for monetary defaults, longer for non-monetary)
- Whether the landlord can accelerate rent, re-enter, or pursue both
- Tenant's right to sublease or assign
Personal guaranty. Texas landlords commonly require personal guarantees from business owners. If you're signing a personal guaranty, understand that it survives the entity — even if your LLC is dissolved, the guaranty obligation remains.
Holdover Provisions
Texas law does not specify default holdover terms for commercial leases. If the lease is silent on holdover, the tenant may become a month-to-month tenant at the same rent. Include explicit holdover provisions — typically at 150–200% of the last month's rent — to incentivize timely move-out.
Create a Texas lease agreement →
Independent Contractor Rules in Texas
Texas uses the common-law right-to-control test for worker classification, applied through the Texas Workforce Commission's (TWC) 20-factor analysis.
The Right-to-Control Test
The central question is whether the hiring entity has the right to control not just what work is done, but how it is done. Key factors include:
- Instructions — does the hiring entity dictate when, where, and how the worker performs?
- Training — does the hiring entity provide training on methods and procedures?
- Integration — is the worker's service integrated into the business operations?
- Tools and equipment — does the hiring entity provide the tools?
- Payment method — is the worker paid by the hour/week, or by the project?
- Profit or loss — can the worker realize profit or suffer loss?
- Multiple clients — does the worker serve other clients?
Texas vs. California
Texas is significantly more flexible than California on contractor classification. Texas does not use the ABC test, and the right-to-control analysis gives more weight to the parties' actual working arrangement. However, misclassification still carries consequences:
- TWC penalties — back taxes, interest, and penalties on unpaid unemployment insurance contributions
- IRS implications — federal misclassification penalties apply regardless of state law
- Wage claims — misclassified workers can file claims for unpaid overtime and benefits
What Your Contractor Agreement Should Include
A Texas independent contractor agreement should:
- Clearly state the relationship is that of independent contractor, not employee
- Define the scope of work and deliverables, not hours or methods
- Confirm the contractor provides their own tools and equipment
- Establish that the contractor is responsible for their own taxes and insurance
- Include an intellectual property assignment clause — Texas follows the "work for hire" doctrine, but specific IP assignment language provides additional protection
Create a Texas contractor agreement →
Key Takeaways for Texas Contracts
- Non-competes are enforceable — with conditions. They must be ancillary to an enforceable agreement and reasonable in scope. Texas courts can reform overbroad restrictions.
- NDAs should align with TUTSA. Use TUTSA definitions and include federal DTSA immunity notices.
- Commercial leases carry extra weight. Minimal statutory protections mean the lease document itself is the primary source of rights and obligations.
- Contractor classification is more flexible than California, but the right-to-control test still applies. Structure the relationship to reflect genuine independence.
- Always specify Texas governing law. Choose a specific Texas venue — Harris County (Houston), Dallas County, or Travis County (Austin) are common choices.
Texas's business-friendly legal environment gives parties significant freedom to define their contractual relationships. Use that freedom carefully — the contract is often the only protection you'll have.