I occasionally get calls from people who are unhappy about a horse sale that has turned out badly. If a dispute arises, the parties will usually disagree about what was represented. Invariably, sellers will refuse to refund your money and you will have to sue them. And, it is difficult to get an attorney to take such a case unless the stakes are large, or you are willing to pay an hourly rate that can wind up costing more than the horse itself.
A horse sale, like any sale, is a contract governed by state law. There are a few special laws governing horse sales, but for the most part the law of contracts is pretty much uniform throughout the country.
Some states require that a horse have a recent Coggins test or be sold with a halter, but violations of these provisions result in penalties under state laws and do not necessarily constitute breach of contract in the horse sale.
In most situations the horse is sold “as is,” with no warranty of soundness or fitness for intended purpose. If you want the seller to guarantee something about the horse (e.g., that the horse is in sound breeding condition), this should be spelled out in writing.
Even if a horse is sold “as is” and with no sales contract, there are still legal obligations that the buyer has. One of them pertains to making an intentional false representation in order to make the sale. For example, if the seller tells the buyer that the horse is “totally sound,” but knows that the horse has navicular, this could constitute fraud. If the seller promises to do something in the future, such as to “throw in” a saddle or equipment if you buy the horse, and never intends to do so, that could be a basis for voiding the contract. If the seller lies about the disposition of the horse, saying, “This horse is safe for children,” but the seller knows or should know that the horse has a tendency to bolt at the slightest provocation, this could constitute breach of the contract.
There is a fine line between sales puffery and legal representations stated in advertisements. Some specific statements in ads can be interpreted to constitute legal representations. A claim that “this horse is 100% sound” could be evidence to prove fraud if the horse turns out to be less than advertised. Or, if the ad said that the horse has “no vices,” and turns out to be a vigorous cribber, there is likely some legal recourse.
It is important to have a written sales contract or at least a simple bill of sale so that there can be no uncertainty about the terms. Three states—Kentucky, Florida, and California—have laws that require a written bill of sale signed by the parties and stating the price. These laws also prohibit dual agency (interest) in horse sales unless disclosed in writing in advance and agreed upon by the parties in writing.
These laws apply if you sell a horse to a buyer in one of these states; buy a horse from a seller in one of these states; act as an agent for a buyer or seller from one of these states; or receive a commission in connection with a horse sale or purchase that took place in one of these states.
In Kentucky and California, the old practice of collecting from both sides without full disclosure has been done away with. In fact, it is unlawful for an agent to accept payment or any item of value worth more than $500 from anyone other than the principal (the buyer or seller who hires the agent) unless (a) the agent and the person making the payment disclose the compensation in writing to both parties and (b) the agent’s principal consents in writing to the payment. For example, if you wish to buy a horse through a bloodstock agent, and the agent has an arrangement for a commission greater than $500 from the owner who is selling the horse, this arrangement must be disclosed and approved of in writing.
The Florida law also says that an agent or trainer cannot recommend that a client purchase a horse in which the agent/trainer has an ownership interest unless the client is aware of the ownership interest prior to the sale. Also, the Florida law requires that relevant medical conditions, defects, and surgeries be disclosed, as well as “the conduct or alterations that could affect the performance of a horse.”
For trainers helping clients buy a horse, it is important to note that any agent who sells to a buyer has a fiduciary relationship that requires the agent to act in good faith toward the principal—in other words, the agent’s responsibility lies with the person who hired him to either sell or purchase a horse. This is particularly true if the agent is also the buyer’s trainer. The trainer cannot sell the client a horse that the trainer knows or should know is unsuitable for the client’s intended purposes. A trainer has an affirmative duty to choose a horse that is suitable to the client.
When it comes to buying and selling horses, full disclosure will always serve both sides well, and getting it in writing even better. To minimize any problems, it is essential to verify that the seller has legal title to the horse, insure that an independent veterinarian conducts an examination of the horse, and enter into a written bill of sale setting forth any warranties or representations made by the seller.
John Alan Cohan is a lawyer who has served the horse, livestock and farming industries since l98l. He has clients in all 50 states. He can be reached at: (3l0) 278-0203, by e-mail at [email protected], or you can see more at his website: www.JohnAlanCohan.com.