Verified Denial Required to Dispute Existence of Contract

The failure to file a verified denial as to the existence of covenant not to compete, according to the Dallas Court of Appeals, prevents a party from later challenging the existence of that contract. In Greenville Automatic Gas Company v. Automatic Propane Gas and Supply, LLC, et. al.; Cause No. 05-13-01405-CV (Tex. App.—Dallas June 9, 2015), the Court held that the terms of an employment contract were settled by the absence of a verified denial of those terms.

Defendant employed Plaintiff for approximately fifteen years as a route driver, delivering propane to Defendant’s customers. Defendant alleged Plaintiff signed a nine-page employment agreement that contained a covenant not to compete. After Plaintiff accepted a position with a competitor, Plaintiff filed a declaratory judgment action against Defendant seeking to establish his rights under the employment agreement. Plaintiff argued that the non-compete provisions of the employment agreement were unenforceable. Defendant filed a response to the petition as well as a counterclaim, attaching a copy of the employment agreement to its answer. Plaintiff did not timely amend its petition to include any affirmative or verified defenses.

At the trial court level, the jury was asked to determine whether Plaintiff agreed to the terms contained in the employment agreement. Defendant objected to the jury question, arguing that, without a verified denial, it was not an appropriate factual determination.

When Defendant pleaded breach of the agreement and attached a copy of the agreement to its answer, it provided fundamental evidence of the contractual relationship between the parties. If Plaintiff wished to challenge the existence of that relationship or the terms to which Plaintiff agreed, Plaintiff was required to file a verified denial. By failing to do so, Plaintiff conclusively admitted the validity of the employment agreement. As the Court noted, “The terms of the employment were settled by the absence of a verified denial of those terms.” The Court reversed the trial court’s judgment and remanded the case for further proceedings.