Alonzo Highsmith, the No. 3 pick in the National Football League draft, agreed in principle to a contract with the Houston Oilers yesterday and his legal battle for free agent status was put on hold while negotiations continued in Miami.

"An agreement . . . was reached in principle between the Houston Oilers and Highsmith," said Lauri Ross, an associate of Hugo Black Jr., one of the team's lawyers in the negotiations.

The agreement came a few hours before the principals were due in court to conclude arguments in the case involving the former University of Miami running back's suit against the Oilers and the league.

The hearing was adjourned until Monday while negotiations continued, said Steve Underwood, another lawyer representing the Oilers.

"Highsmith wants to sign with the Oilers and the Oilers want to sign him, and they'll probably get it done before Monday," said a source familiar with the negotiations.

Dade County Circuit Court Judge John Gale, a prominent University of Miami booster, had granted the Hurricanes' former star a temporary injunction making him a free agent.

Highsmith, the third player chosen in the draft, has not reported to the Oilers' training camp. Highsmith sued the NFL and its 28 teams, charging the Oilers were not offering him a fair contract and that the NFL conspired to fix the salaries paid to draft choices . . .

The New England Patriots announced running back Craig James has undergone surgery to repair ligament damage in his right knee and is expected to miss the rest of the season . . .

St. Louis County Executive Gene McNary and St. Louis Mayor Vincent C. Schoemehl Jr. apparently have come to an agreement on the idea of a domeless stadium in St. Louis County.

But Bill Bidwill, owner of the St. Louis Cardinals football team, has not said if he is interested in a new open-air stadium. Bidwill has said the team's current home -- Busch Stadium -- is too small.