Equine Legal Solutions Horse Law

From time to time, I'm asked how the downturn in the economy has affected the horse industry. Here's my perspective as an equine attorney.

Boarding

Although Equine Legal Solutions always receives a lot of calls from boarding stables about boarders who aren't paying their bills, the situation seems to have reached nearly epidemic proportions, particularly in California. Our practice spans California, New York and Washington, and most of the calls about past-due boarders come from California, with an increasing number from Washington. Over half of our free phone consultations are now about non-paying boarders, whereas those calls typically represent more like 20% of our call volume.

In more and more of the non-paying boarder cases, the boarding stable has no way of reaching the boarder. Sometimes, the information the boarder gave the stable was completely fictional - the boarder intended to dump the horses on the boarding stable from the very beginning. (Note that screening potential boarders would help eliminate this problem.) In other cases, the boarder's contact information was initially good, but the boarder's phone has now been disconnected, and the boarder hasn't visited the stable in quite a while. Often, the boarding stable has sent the boarder a certified or registered letter, which has been returned unclaimed. The boarding stable is often desperate for solutions and wants to know when the boarder's horses are considered abandoned and what the stable can do with them.

Now more than ever, the boarding stable is usually better off not executing on its agister's lien. The horse market has declined significantly due to the slaughter ban and the recession. Horses that would have brought at least $500 at auction a few years ago now have no value at all. Meanwhile, hay prices have increased dramatically, making it more expensive to feed horses while waiting for foreclosure proceedings to conclude. And, the chances of being able to collect past due board through traditional methods are slimmer. The boarder may be out of work, with no wages to garnish, and/or may be preparing to file for bankruptcy. Usually, the best thing a boarding stable can do is to get the boarder to come and take the horses, even if the boarder owes the stable money. Getting the horses off the property stops the meter from running on the hay bill and it also cuts off the stable's potential liability for the horses' care.

More boarding stables are having to enforce the payment, lien and eviction portions of their boarding contracts. Unfortunately, many of them are finding their contracts don't adequately address the issues they face. These old, outdated contracts have unwieldy and difficult notice procedures for eviction involving certified and/or registered mail (which most deadbeat boarders will not claim). Often, they require the stable to give the boarder 30 days' notice of termination, even if the boarder owes the stable thousands in back board, effectively making the stable feed the boarder's horse for free for yet another month. And they contain virtually no practical remedies for collecting past due board and getting rid of abandoned horses and tack. As a result, more boarding stables are weighing the high cost of dealing with boarding problems, and deciding that having a boarding contract they can rely upon to protect their interests is well worth the relatively small price.

Breeding

Most breeders booked fewer breedings in 2009, and many of the bookings were made later than usual, simply because mare owners needed to wait to make sure they had the money to breed this year. Mare owners are being more selective, opting to breed fewer mares. Large breeders are downsizing their broodmare bands, keeping the best and offloading the rest. Many smaller breeders are exiting the breeding business altogether, finding that it's less expensive to buy young stock than it is to breed their own. As a result, there's a glut of broodmares on the market and prices are at historic lows.

Given the significant costs associated with shipping cooled semen and artificially inseminating mares, some breeders are finding that offering live cover and on-site artifical insemination services is drawing more local breedings. Breeders are also keeping costs down by doing more of the work themselves and involving veterinarians and stallion stations less frequently.

As usual, discounts are available to mare owners who book early, book multiple mares and/or have mares with proven production or show records. However, these discounts are more widespread, the discounts are deeper, and even the top stallion owners are offering them. Hoping to draw budget-conscious mare owners, some stallion owners are waiving collection and shipping fees on initial shipments, and others are significantly reducing stud fees and eliminating booking fees. Other stallion owners are offering enhanced live foal guarantees, some with no stud fees due until a live foal is born.

Horse Sales

It won't be news to anyone that horse sales are down, and so are horse prices. Craig's List abounds with free horses, and not just junk. More and more of those free horses are sound, registered and/or well-trained. Breeders are having more dispersal sales, and sending more young stock and broodmares to auction.
At the same time, there are fewer buyers at those auctions, and the buyers who do attend buy fewer horses. Sellers are less likely to "no sale" low-selling horses, opting not to haul them home.

Some horse buyers are being more careful. They're making fewer impulse purchases, not buying as many horses sight unseen over the Internet. They're using horse purchase contracts, insisting upon some accountability from the seller. Some horse buyers are taking horses on trial and/or making payments in installments. More sellers are agreeing to these relatively risky terms because they have no other buyers, but conscious of these risks, they are seeking out higher quality horse sale contracts in an effort to protect themselves.

Other horse buyers are cutting costs unwisely, opting not to get a pre-purchase vet exam or not have radiographs or blood draws done during the exam. And some horse sellers are also accepting risky deals that they wouldn't have even considered in a better economy, simply because they need to move some horses, and they need to do it now.

Riding Lessons

It should come as no surprise that many families consider riding lessons a luxury, so children's lessons are eliminated or reduced when a family experiences financial difficulty. Adult amateurs are also doing without lessons, opting to ride on their own instead.

Training

A lot of horse owners who would have sent young horses to a trainer are now either letting those horses sit, selling those horses as unbroke or greenbroke, or doing some of the training themselves. As a result, I think we can expect to see even more untrained young stock for sale in the coming months. Other horse owners who normally keep their horses in full-time training are bringing their horses home, or cutting back to part-time training, filling in the gaps themselves. Fewer training clients are going to shows, and many of those still showing are opting to attend fewer shows and show in fewer classes this year. More and more trainers are opting to use training contracts, fearful that they won't get paid, or will get stuck with a client's horse.

Labels: agister's lien, horse boarding, horse breeding, horse sales, horse training

Happily, there are a lot of minors (persons under 18 years of age) involved in the horse industry. At Equine Legal Solutions, we're often asked whether a minor can sign a boarding contract, horse lease agreement or horse purchase agreement. The short answer is yes. But, there are reasons why you may not want to enter into a contract with a minor.

Minors Can Back Out of Contracts

In the horse context and in most U.S. jurisdictions, almost all contracts will be voidable by the minor. At any time, the minor can choose to back out of the contract, with no penalty. For example, if a minor signs a boarding contract with a boarding stable, the boarding stable can't hold the minor to the contract. Even if the stable honors its obligations and provides wonderful care for the minor's horse, it won't be able to require the minor to pay board or honor a 30-day termination notice provision. This seems like a very unfair result, especially when the minor has received the benefits of the contract. However, the prevailing legal theory is that minors are particularly susceptible to being taken advantage of, and therefore the law must protect minors who enter into contracts with adults. By making it rather disadvantageous to enter into a contract with a minor, the law effectively protects minors by preventing adults from contracting with them.

Minors Can Enforce Contracts

In contrast, a minor can enforce the provisions of a contract against an adult. So, if an adult enters into a contract with a minor to sell the minor a horse, the adult can't change their mind if they get a better offer. If they do, the minor could sue the adult for damages or for "specific performance" - i.e., legally force the adult to sell the horse to the minor. Again, the legal theory is to discourage adults from entering into contracts with minors, thereby protecting minors from contractual exploitation by adults.

If the Minor Owns the Horse

Often, a minor is the registered owner of their horse. How, then, should trainers, boarding stable owners and other equine service providers handle that situation? The answer is fairly simple: Have the minor's parent or guardian sign the boarding or training contract. Like service provider situations involving leased horses, if the parent or guardian isn't listed on the horse's papers as a registered owner, this fact won't affect the trainer's or boarding stable's ability to enforce the contract.

Minors and Liability Releases

A liability release is essentially a contract. Therefore, if a minor signs a liability release, that signature is pretty much worthless because the minor can void the contract at any time. How, then, can boarding stables, riding instructors and other parties protect themselves against legal claims brought by minors. The short answer is to have the minor's parent or guardian enter into a liability release on behalf of the minor. For added protection, the liability release should include an indemnification clause stating that if any claims are later brought by the minor or on the minor's behalf, the person signing the liability release agrees to pay to defend the person being sued, and to pay the cost of any legal judgment. Equine Legal Solutions offers a wide range of liability releases meeting these requirements, including liability releases specifically designed for situations involving minors.

Labels: equine liability, horse boarding, horse leasing, horse sales, horse training

When the State of Florida enacted Section 535.16 of the Florida Statutes tasking the Florida Department of Agriculture and Consumer Services with adopting rules to "prevent unfair or deceptive trade practices" in horse sales, the equine community waited with great anticipation (and a fair bit of scoffing). There was widespread speculation that the horse sale rules would never be promulgated, or that when they were, they'd be toothless or poorly written, and it would be business as usual for the horse industry. However, the new Florida equine sale rules go a long way toward leveling the playing field for both horse buyers and horse sellers. In this article, we'll discuss the new disclosure requirements for horse sales agents (and horse purchase agents), in Part II, we'll discuss the new horse sales disclosure requirements, and in Part III, we'll discuss the new horse sale requirements as applied to auctions.

Florida Requirements for Dual Agents in Horse Sales

Horse Sale #1: Big Name Trainer has two clients, Clara Clueless and Nona Knownothing. Clara has a horse, Money Pit, that she wants to sell. BNT agrees to help Clara sell her horse in exchange for a 10% commission. Nona wants to buy a horse and BNT agrees to help her find a horse in exchange for his customary 10% finder's fee. BNT shows Money Pit to Nona, who loves him and immediately agrees to buy him. BNT arranges for the sale of Money Pit to Nona, and collects a 10% commission on the sale price of Money Pit from each of Clara and Nona. BNT does not talk to Clara about the commission that Nona paid him, and likewise, he doesn't discussion Clara's commission payment with Nona. BNT has heard about the Florida equine sale rules, but figures they don't apply to him because that's the way he's always done business, and after all, he is a big name trainer.

Under Florida Rule 5H-26.002, BNT served as a "dual agent" because he represented both the horse owner (Clara) and the horse purchaser (Nona) in the horse sale transaction. Florida Rule 5H-26.003(2) prohibits dual agency in horse sale transactions unless the horse buyer and the horse owner know in advance and agree to the dual representation in writing. Here, BNT violated Florida rule 5H-26.003 because there is no indication that Clara and Nona both knew in advance of the sale that BNT was representing both of them and they certainly did not agree in writing to the dual representation.

Florida Horse Sale Commission Disclosure Requirements

Horse Sale #2. After the purchase of Money Pit, Clara decides she needs to sell another of her horses, Always Lame. Clara approaches BNT and asks him to sell Always Lame, telling him that she wants to "get at least $25,000" for him. BNT doesn't have a client in his barn who would be interested in Always Lame, so he calls up a trainer buddy of his, Dewey Cheatem. Dewey tells BNT that he does have a client who's horse shopping, Nancy Naive, and Nancy is willing to spend up to $50,000 for a new horse. Dewey and BNT show Always Lame to Nancy, telling her that the asking price is $50,000. Nancy falls in love with Always Lame (and on Dewey's expert advice, decides to forgo a vet check). Nancy pays $50,000 to BNT, who provides her with Always Lame's registration papers (and of course, the parties do not use a bill of sale). BNT tells Clara that Nancy has agreed to pay $25,000 for Always Lame, and Clara is thrilled to get her asking price. BNT had agreed with Dewey that they would split any amount over $25,000 that they could get Nancy to pay for Always Lame, so BNT pays $12,500 to Dewey, $25,000 to Clara and pockets the remaining $12,500. BNT also receives a commission of $2,500 from Clara, and Dewey receives a commission of $5,000 from Nancy. BNT and Dewey shake their heads at the cluelessness of Florida legislators, noting it would ruin their business if they complied with the new Florida rules. Fortunately, they decide, the rules don't apply to industry scions like themselves.

If an agent for a horse purchaser or a horse owner receives more than $500 of compensation in connection with a horse sale, Florida Rule 5H-26.003(3) requires certain disclosures. The agent who receives the commission and the person who pays it must provide written disclosure to both the horse purchaser and the horse owner. And, the horse owner and purchaser must consent to the payments in writing. So, in Horse Sale #2, BNT and Dewey would have to disclose in writing to both Clara and Nancy that they would each receive $12,500 in connection with the sale, and Clara and Nancy would both have to consent in writing. As you might imagine, Florida Rule 5H-26.003(3) is designed to thwart exactly the type of "secret commission" sales described in Horse Sale #2.

Florida Horse Ownership Interest Disclosure Requirements

Horse Sale #3: BNT has worked out a deal with Clara whereby he will train Clara's horse Pig in a Poke in exchange for 50% of the sale proceeds when Pig in a Poke sells. No one knows about the particulars of this arrangement except Clara and BNT. One of BNT's other clients, Farah Fearless, tells BNT that she wants to buy a new horse. BNT agrees to help Farah buy a new horse and Farah agrees to pay him a 10% commission. BNT just happens to mention to Farah that Clara is planning to sell Pig in a Poke. Clara loves Pig in a Poke and jumps at the chance to buy him for $40,000. BNT never mentions to Clara that he owns 50% of Pig in a Poke, and only Clara's name is on Pig in a Poke's registration papers. Farah pays Clara $40,000, and Clara delivers $20,000 to BNT. Farah also pays BNT a commission of $4,000.

BNT has just violated Florida Rule 5H-26.003(5), which provides that an agent or trainer can't recommend that their 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. Interestingly, Rule 5H-26.003(5) does not require the client's written consent unless it is "practicable."

Horse Sale #4
Anna Amateur is a very successful rider and spends a lot of time training her horses for competition. Anna co-owns a horse, Expensive Hobby, with Nona Knownothing. Expensive Hobby is registered in Nona's name only and stabled with Nona's trainer. Clara Clueless is a friend of Anna's, and she admires Anna's taste in horses. After having been burned a few times by BNT, Clara decides that she'd much rather have Anna help her select a horse. Anna steers Clara toward Expensive Hobby, but never mentions that she is a part owner. Clara buys Expensive Hobby and pays the purchase price to Nona. As a thank-you for Anna's help, Clara takes Anna out for a lavish dinner.

Notably, and unlike the other provisions of Rule 26.003, Section 5H-26.003(5) includes "trainers" as well as agents. Florida Rule 5H-26.002(3) defines "trainer" as "a person who trains horses for contests, shows or performances." Notably, this definition of trainer doesn't state that the person must be paid for the training or otherwise have a business training horses. Therefore, an amateur such as Anna could possibly fall within the purview of the rule.

Penalties for Violating Florida Equine Sales Agent Disclosure Rules

Florida Rule 5H-26.003(13) provides that violation of any part of the Florida equine sale rules is an "unfair and deceptive trade practice" under Part II of Chapter 501 of the Florida Statutes. Pursuant to Section 501.211 of the Florida Statutes, the injured party can recover their actual damages, attorneys' fees and court costs from the violator. This is very significant. In the typical horse sale transaction, actual damages are fairly low, and therefore attorneys' fees and court costs often greatly exceed the actual damages. Without a horse sale contract containing an attorneys' fees clause, plaintiffs have little hope of recouping their costs of bringing suit and therefore they're unlikely to sue. However, the new Florida rules change that by providing a mechanism for plaintiffs to recoup their costs if they win. Therefore, Florida can expect a lot more lawsuits related to horse sales!

In addition, pursuant to Section 501.2075, the State of Florida is entitled to collect a civil penalty of up to $10,000 if the violator knew or should have known that their conduct was a violation of the Florida rules. This provision may provide an incentive to sue in cases where the plaintiff's actual damages are low, but sense of outrage is high, such as in Horse Sale #1.

Labels: equine liability, horse sales, horse training

A prepurchase veterinary exam is one of the best forms of protection for horse sellers as well as horse buyers. If the buyer has had a prepurchase vet check and the horse later develops a physical problem, that prepurchase exam provides the seller with an automatic defense. In order to have a valid legal claim for fraud or misrepresentation against the horse seller, the buyer will have to show that the horse's condition was pre-existing and that the seller (a) knew about it and (b) didn't disclose it - see The Legal Landscape of Horse Sales.

The prepurchase exam serves as a professional evaluation of the horse's condition at the time of sale, and one performed by an agent of the horse buyer. So, if the horse's post-sale ailment turns out to be a pre-existing condition, such as navicular, there are several distinct possibilities, only one of which implicates the seller: (a) the condition was not detectable at the time of the vet check; (b) the condition was detectable, but the vet performing the prepurchase missed it; (c) the condition was detectable, but the buyer did not authorize the vet to perform the diagnostics that would have revealed the problem (e.g., X-rays); or (d) the seller successfully concealed the condition by administering painkillers, tranquilizers or other drugs to the horse. Only in the case of (d) would the buyer have a case against the horse seller, and the buyer would have to be able to prove that the seller concealed the condition.

(5) Not Providing the Buyer with Access to a Sale Horse's Vet Records

Making a sale horse's vet records available to prospective purchasers is disclosure that serves to protect the seller (as well as the buyer). Note that making the records available to the horse buyer still protects the seller even if the buyer never actually obtains the records from the seller's vet, or reads them.

For example, let's say that a performance horse has been treated for various miscellaneous lamenesses over the years, and that he receives regular hock injections to help keep him sound. The horse is sound at the time of sale, but the seller doesn't specifically mention that the horse needs hock injections, figuring that it's routine maintenance. The horse's vet records clearly show the various lamenesses, as well as the hock injections. Two months after purchase, the horse shows some hock stiffness and is no longer sound. The buyer finds out through the grapevine that the horse had been receiving hock injections and had had various lamenesses, and sues the seller for fraud and misrepresentation. There was no prepurchase exam, and no bill of sale. At the time of sale, the seller told the buyer that they were welcome to obtain a copy of the horse's vet records from the seller's vet, and the seller faxed a letter to their vet authorizing the vet to release records to the seller. Clearly, the seller would be able to defend itself by stating that it had offered the buyer the opportunity to learn about the horse's veterinary history prior to purchase, and that the problems the buyer was complaining of were clearly stated in the written record. Had the seller not offered the buyer the opportunity to see the vet records (and the seller had proof of the offer, in the form of the faxed authorization to the vet), the buyer could then subpoena the horse's vet records and use them against the seller, as evidence that the seller was aware of a problem and didn't disclose it.

Labels: equine liability, horse sales

This morning, I walked down to our mailbox and retrieved the December 2008 issue of Horse & Rider. Intrigued by the headline "When Sellers Cheat, We All Lose," I flipped directly to that article and read it with interest while walking back up our lane. Horse & Rider Consulting Editor Sue M. Copeland featured a letter from an anonymous Michigan reader who felt that she had been cheated on two successive horse purchases, and was exiting the industry. Copeland astutely pointed out that bad horse deals are bad for the industry because they discourage newcomers and inspire long-timers to leave it. I couldn't agree more, and I wish Copeland much success in the horse buyers' handbook that she is co-writing with trainer Bobby Avila.

However, I don't agree with Copeland that hiring a trainer is the best way to avoid being cheated on a horse deal. An honest, skilled trainer can help you select a horse well suited for yourself and your discipline and offer insider knowledge about particular horses and sellers as well as market prices and prepurchase vets. However, many trainers, at all levels (yes, especially the highest levels of the sport) and in all disciplines, don't serve in this capacity for someone who is not a regular client of theirs. Sure, they might agree to help a non-client find a horse, but unless the buyer seems likely to become a training client after the sale, all bets are off on what kind of help the buyer will receive. Often, the trainer will simply steer the buyer toward a horse for sale in the trainer's own barn. And, most likely, the trainer will pocket a commission on the sale from the seller, which won't be disclosed to the buyer - see Secret Profit-Taking: The Truth about Horse Sale Commissions.

I do believe that there is no single best method to avoid being cheated in a horse deal, but instead, horse purchasers should employ several different strategies to protect themselves. The Michigan buyer whose letter was featured in Copeland's article felt that she had done everything right, and still got cheated. But, did she really do everything she could have done? She did get a prepurchase examination, but did it include radiographs? A drug test? These are elements of a pre-purchase exam often skipped by cost-conscious buyers. The buyer also made no reference to having used any kind of purchase contract, either.

Still, unlike most unhappy horse buyers, this Michigan buyer appears to have a legal case. While horse sales are widely reputed to be "as is," there is an important exception: when a seller knows about a significant problem and doesn't disclose it. Here, the buyer says that she has found witnesses that have seen the horse exhibiting the same problem now troubling the horse. So, unlike most horse buyers who suspect fraud, this buyer may actually be able to prove it. And, she had a pre-purchase exam - why didn't the vet find the defect?

Instead of exploring her legal options, the buyer seems to be simply taking her lumps and keeping quiet. She even sent in the letter to Horse & Rider anonymously, so that no other prospective buyers can be warned about the sellers who sold her these problem horses, or the vet who performed a possibly inadequate pre-purchase exam. Every buyer who keeps quiet about being cheated in a horse sale is perpetuating the problem. One of the most effective things a dissatisfied buyer can do is SPEAK UP and let people know what's happened to them. The First Amendment gives buyers the right of free speech, and as long as they stick to the facts and their own opinions, buyers should have few concerns about defamation lawsuits.

Labels: horse sales

Especially in a down economy, horse sellers are tempted to take their horses off of the market until the market improves. But, how much will it cost to keep a horse until the market does improve, and IF the market does turn around, will the increase in price be enough to justify having the kept the horse all that time?

Some horse sellers think, "I can't accept that offer. It's less than I paid for him. I've spent X dollars just in training on that horse. If I accept this offer, I'll be losing money." But, they are failing to realize that every week they keep that horse, they are still losing money in the form of what it costs to keep it.

To help horse sellers more easily evaluate the offers that they receive, Equine Legal Solutions has put together a simple Excel spreadsheet - see link below. In the first tab is a month-by-month list of the sale horse's expenses, which includes such regular costs as board as well as occasional costs such as vaccinations. In the second tab are the horse's asking price, the offer price and then the cost of keeping him. If the cost of keeping the horse exceeds the difference between the offer price and the asking price, the seller should accept the offer.

Beyond the pure mathematics, there's also the risk that the horse may decrease in value unexpectedly and/or incur unforeseen expenditures. For example, the horse could colic and require colic surgery. Not only would the seller have to pay for the surgery, they would then have to keep the horse during its recovery (incurring the regular maintenance costs) and when the horse recovers, the fact that it had required colic surgery would have a significant negative impact on its market value. In the case of a broodmare, if the seller keeps the mare another breeding season and then fails to get her in foal, the mare's value as a broodmare is negatively impacted (plus the seller has to pay to keep an open mare).

Another consideration is the likelihood that the seller will get another (higher) offer on that horse, and how long it will take to get it. The less marketable the horse, the longer it will take to get another offer.

In general, horses that aren't very marketable include:

-Broodmares that haven't produced anything of note
-Broodmares with a history of being difficult to get in foal and/or that have difficulty foaling
-Broodmares that have consistently produced undesirable traits (e.g., color breed foals without color)
-Any performance horse that has a significant soundness management issue (e.g., navicular)
-Any horse with a behavior issue (i.e., rearing, bucking, poor ground manners)
-Any horse that cribs, weaves, or has another annoying stall vice
-Any horse with a notable conformation flaw (i.e., parrot-mouthed)
-Any horse that is out of condition (i.e., hairy and ribs showing)
-Performance prospects that are behind their peers in terms of training (i.e., unbroke four-year-olds, yearlings that aren't halter-broken)
-Performance-bred horses that have average or below average ability
-Halter-bred horses that have average or below average conformation
-Stallions. Even if the stallion has a very strong production record, there is a very limited market for stallions, because few people have the facilities and experience to keep one properly. Those who do have the proper facilities and experience tend to already have a stallion (or not want one).

In summary, unless the offer price is ridiculously low, it almost always makes sense to accept that offer and get the horse off of your payroll. Keep in mind that you can make a counteroffer, too - ask for a just a bit more and you may minimize your losses and still have a willing buyer.

Offer%20Analysis%209.17.08.xls

Labels: horse sales

At Equine Legal Solutions, we are often asked if buyers can do anything to procure the papers of horses that are registered, but sold to them without papers. To answer that question, it is helpful to analyze the common reasons why registered horses are sold without papers.

Use Limitation

The seller of a registered horse may retain the registration papers of a horse to limit the ways in which the horse can be used. For example, racehorse owners often retain the Jockey Club papers of former racehorses being sold at a nominal price to a non-race home. This prevents the horse from being raced again at some later date. In the case of mares, it also prevents the horse from being used as a broodmare to produce Jockey Club registered foals. In these circumstances, it is typically impossible to obtain the horse's registration papers.

Not Wanting a Breeding Record

Some breeders who have produced undesirable stock will sell those horse without papers, even though the horses are registered (or eligible for registration) because the breeders do not want the general public to know where those horses came from. For example, it is fairly common for Paint stallion owners not to register solid offspring with the American Paint Horse Association, even though they are eligible for registration as Solid Bred Paints. If solid foals are not registered, APHA get of sire records will reflect only colored foals, leading prospective breeding customers to believe that the stallion's color production rate is higher than it really is. Similarly, a breeder whose stallion has produced a poorly conformed foal may not wish to register that foal and instead sell it as a grade horse, thereby reducing the chances that anyone will ever know that the stallion produced that foal. In these cases, too, it is usually impossible to obtain the horse's registration papers.

Title Problems

In many cases, the seller may not deliver the registration papers simply because the seller does not have them. Often, the seller has purchased the horse on installments from the original owner (who held onto the papers pending final payment), and the seller has not finished paying the original owner. To find out who the registered owner of the horse is, call the breed association. If the registered owner is someone other than the seller, sometimes you can obtain the horse's papers by calling the registered owner and paying off whatever amount that person was still owed on the horse. The breed association will generally provide you with the name of the registered owner, but not their contact information. To track down registered owners, you may find resources such as www.whitepages.com and www.intelius.com very helpful.

Labels: horse sales

Just as there are horse buyers to beware of, there are also horse sellers who should be avoided. In our examinations of many, many unsuccessful horse sales, we have identified several seller characteristics that are hallmarks of risk. The more characteristics present, the riskier the transaction is.

(1) The Liar

Horse advertisements are almost as legendary as real estate advertisements when it comes to emphasizing the positive and ignoring the negative. As examined in our equine advertising translation guide, horses often don't live up to their advertisements, to the point of humor. However, there is a big difference between a well-written ad and one that actively misrepresents the horse. Here are some examples of equine characteristics that are often misrepresented, each of which can be easily verified by the buyer prior to purchase: height, age, pedigree, registration status, and identity of registered owner. Even if the misrepresented quality is not an obvious deal-breaker, keep in mind that if the seller isn't telling the truth about something you can easily verify, the seller probably isn't truthful about less obvious issues, either.

(2) The Evader

If you ask direct questions, such as those in our Horse Buying Checklist, and the seller avoids giving you a clear response, that should be a red flag.

(3) The Apologizer

Within reason, the seller should be able to demonstrate everything that the horse is advertised as able to do, and at the level at which the horse is advertised to be performing. If for reasons such as weather or facilities, the seller's property does not permit the horse to be properly shown to you, the seller should be amenable to transporting the horse to a place where it can be properly shown to you. Beware the seller who explains a horse's failure to live up to his advertising as a "bad mare day" or the like. You can safely assume that if the horse won't perform properly at a sale showing, he won't perform properly when you need him to, either.

(4) The Bully

You should be completely comfortable with all the terms of a transaction and not allow a seller to bully you into agreeing to unacceptable terms. If the seller argues with you over the terms of the sale, imagine how difficult it will be to get any cooperation from them after the sale. Likewise, you should not allow yourself to be badgered into a premature sale by a seller's threats of having other buyers lined up, raising the price, etc.

(5) The Ignoramus

If you ask direct questions and the answer always seems to be some form of "I don't know," that's a red flag. If the seller doesn't know because they haven't had the horse very long, query why the horse is back on the market so soon. Sellers using sales agents who aren't knowledgeable about the horse may believe (erroneously) that they don't have to disclose a material bad fact if the agent doesn't know about it.

(8) The Smooth Talker

There's a difference between a good salesperson who can answer your questions and a smooth talker with a slick line of patter and an answer for everything. Beware the latter.

(9) The Dealer

While there are a few reputable horse dealers, they are in the distinct minority, to the point that "reputable horse dealer" is nearly an oxymoron. Reputable sales barns do share some common characteristics, however. They are knowledgeable about the horses they are selling, and have had them long enough to fairly evaluate their temperament, health and training. They want to sell you a horse that is a good match, not just sell you any horse you'll buy. Their terms of sale are clear, and they are memorialized in a good sales contract. They have been in business in the same geographic area for a number of years, and gladly provide you with numerous references to whom you can personally speak (rather than just glowing website testimonials). They do not have a lengthy history with their local Better Business Bureau or mentions on sites like www.complaints.com. When you Google their name, the search results do not include numerous unsavory chat board discussions of their shortcomings.

(10) The Balker

Any seller who balks at allowing you to see or try out the horse should be avoided. Likewise, any seller who balks at a vet check from a vet of your choice (whomever that vet might be) should be avoided.

(11) The Reluctant Salesperson

Sometimes, sellers don't seem very interested in selling their horses. They can't seem to make time for you to come and see the horse, bother to take pictures, promptly answer your emails, or send you a video. Why should you be interested in buying if the seller can't be bothered?

Labels: horse sales

At Equine Legal Solutions, we receive calls from thousands of dissatisfied horse buyers who want to know what their legal options are. Here, we will walk you through the legal landscape of a horse purchase.

Often, ELS' callers want to know "what law applies to horse sales." Whether the terms of a horse sale are written or oral, the transaction is a contract. Therefore, horse sales are governed by contract law. Rather than written statutory law, contract law is mostly based upon a series of decided cases in which judicial opinions describe the legal principles used to arrive at a decision.

Other than with respect to certain limited regulation of agency and commissions in horse sales, there are no special laws governing horse sales. For example, there is no cooling off period in horse sales (i.e., no time period in which the buyer can rescind the purchase with no consequences). Although some states, such as California, have puppy lemon laws, ELS is not aware of any such laws pertaining to horses. While some state statutes or regulations may require that a horse have a recent Coggins test or be sold with a halter, a seller's failure to provide these items only means that he may have violated a state law and be subject to certain penalties. It does not void the sale.

In general, horse sales are understood to be "as is" and "buyer beware." This means that the buyer has a duty to examine the horse prior to purchase and except as described below, all sales are final.

The as is nature of a horse sale can be changed by agreement between the buyer and seller. Such agreement can be written or oral, but of course the terms of an oral agreement are generally more difficult to prove. For example, a seller might provide a buyer with a very simple bill of sale that says, "I, John Q. Seller, sell to Suzy Q. Buyer, Mighty Temptation, a sorrel 5-year-old AQHA gelding, for the sum of $5,000." With that bill of sale, whether the seller realizes it or not, they have just made the following warranties: (i) the horse being sold is actually Mighty Temptation, the horse described in the bill of sale, (ii) the horse is five years old; (iii) the horse is a registered Quarter Horse; (iv) the horse is sorrel; and (v) the horse is a gelding. If any one of those warranties are breached, the buyer may have recourse against the seller.

Contrary to popular belief, the as is nature of a horse sale does not give a seller carte blanche to cheat a buyer. A showing of civil fraud can overcome even a written contract containing an as is clause. Fraud is present when a seller intentionally makes a false representation to the buyer in order to make the sale. False representations can take many forms. The following examples would qualify as false representations:

-The seller tells the buyer something about the horse that isn't true when the seller says it, and the seller knows it isn't true. For example, the seller says, "He's totally sound," but the seller knows that the horse has navicular.

-The seller tells the buyer something about the horse, but the seller has no basis for believing it. For example, the seller says, "He's an excellent barrel horse," but the seller has no idea whether the horse can actually run a barrel pattern or not.

-The seller promises to do something in the future, but doesn't ever intend to keep that promise. For example, the seller tells the buyer, "If you buy the horse, I'll throw in this pickup truck," but the seller never intends to give the buyer the truck.

-The seller gives his opinion to the buyer, but the opinion is a lie. For example, the seller tells the buyer, "This horse is great with kids, a real babysitter," but the seller knows the horse has a nasty habit of bolting at the slightest provocation.

While there is perhaps a fine line between sales puffery and representations, advertisements often contain specific statements that can be interpreted to be part of the deal. For example, a buyer who purchased a horse advertised as having "no vices" would likely have recourse against the seller if, upon arrival at the buyer's, the horse revealed itself to be a vigorous cribber. Likewise, a buyer who purchased a horse advertised as "100% sound" would likely have recourse against the seller if the horse turned out to have heaves. Note that the buyer would likely still have recourse even if they signed a contract that says "as is."

The seller may also have a special relationship with the buyer that creates its own legal duties. For example, if the seller is also the buyer's trainer, the seller has an affirmative duty to help the buyer select a horse that is suitable for the buyer. In other words, the seller/trainer can't sell the buyer a horse that the trainer knows (or should know) is unsuitable for the buyer.

The seller may also be subject to the provisions of the Uniform Commercial Code (UCC). A person earning substantial income from the relatively frequent sale of horses, such as a breeder, broker or bloodstock agent, would likely be considered a "merchant" under the UCC. (A person who sells one or two horses a year would probably not be a merchant.) The UCC provides that merchants give two implied warranties: merchantability and fitness for a particular purpose. In the context of horse sales, "merchantability" would likely be interpreted as reasonably sound and healthy with no serious behavioral issues. "Fitness for a particular purpose" means that the horse is suited for the discipline or use that the seller represented to the buyer. To disclaim these warranties, the seller must do so in writing.

Labels: horse sales

As the general horse-owning public becomes more knowledgeable about HYPP, Equine Legal Solutions receives more questions about disclosure of HYPP status in sales and purchases. Typically, the buyer has purchased a horse without any awareness of its HYPP status and has determined post-purchase that the horse is HYPP N/H. Sometimes, the buyer finds out after the horse begins to display HYPP symptoms. In other cases, the horse is not symptomatic, but the buyer is worried that the horse might develop symptoms.

Does the seller have a legal duty to disclose a horse's HYPP status at the time of sale? What responsibility does the buyer have to educate themselves about HYPP and other genetically-linked conditions, and have horses tested during a pre-purchase veterinary examination? In general, horse sales are buyer beware, but with one very important exception. The seller has a legal duty to disclose material facts about the horse that are known to the seller, especially defects.

Being N/H or H/H for HYPP is clearly a material fact in a horse sale. Note that this is true even if the horse has never suffered an "attack" or otherwise shown outward symptoms of HYPP. The materiality stems from several important factors. With the possible exception of certain halter horses, being an HYPP carrier, especially an H/H carrier, has a significant negative impact on the horse's fair market value. For mares and stallions intended for breeding, HYPP status is a vital consideration. To minimize the possibility of HYPP symptoms and maximize the horse's performance potential, veterinarians recommend certain diet restrictions. During an HYPP attack, a horse could injure itself or its rider or handler.

So, because HYPP is a material fact, if a seller is aware of a horse's HYPP status, the seller has a duty to disclose it to the purchaser prior to the sale. For example, if a seller has had the horse tested and the results are N/H, the seller has a duty to disclose such fact to the buyer.

In some situations where the seller is unaware of the horse's HYPP status, the seller may have reason to suspect the horse is a carrier. For example, a breeder may breed an N/H mare to an N/N stallion. Statistically, the odds of the foal being N/H are 50%. So, even if the breeder has not had the foal tested, as long as the breeder knows the mare is N/H, the breeder knows there's a good chance the foal is a carrier. At Equine Legal Solutions, this awareness creates a duty of disclosure to the foal's buyer.

If a horse has had an unexplained collapse episode or shows other symptoms that may be related to HYPP, the seller would have a duty to reveal such information to the buyer, even if they are unaware of the horse's actual HYPP status or the cause of the symptoms. The duty stems not necessarily from the possible link to HYPP, but rather from the fact that the horse has shown significant, unexplained symptoms that may have an important impact on its health.

Now, what responsibility does the buyer have? If the seller discloses possible symptoms of HYPP or the fact that the horse may be an HYPP carrier, the buyer should include an HYPP test as part of the veterinary prepurchase exam. If the buyer is knowledgeable about the existence of HYPP, the buyer should examine the horse's pedigree, and if "Impressive" is present, the buyer should have the horse tested for HYPP as part of the prepurchase exam. If there is any doubt about whether the horse might be a carrier, the buyer should have the horse tested for HYPP prior to purchase. If the seller makes proper disclosures (or has no knowledge or reason to know of the horse's HYPP status), and the buyer chooses not to test the horse for HYPP, the buyer then bears the risk that the horse is a carrier. Note that this is true even if the buyer is not knowledgeable about HYPP.

Labels: horse sales

Just one week prior to trial, Emmanuel De Seroux, the last remaining defendant in Kendall-Jackson winery owner Jess Jackson's California lawsuit for fraud related to racehorse sales settled. To avoid going to trial, De Seroux reportedly paid Jackson $3.5 million. Other defendants in the case previously settled for various six-figure amounts. The case alleged that De Seroux and others defrauded Jackson by selling him racehorses at inflated prices that included undisclosed commissions and kickbacks.

Hopefully, the publicity surrounding this case will serve as a warning to those horse sales agents and trainers whose business models depend upon undisclosed commissions. However, like most horse-related cases, it will not serve as a legal precedent, simply because it settled before trial and therefore no judicial opinion was issued on the merits of the case.

Labels: horse sales

As you might imagine, being an equine law firm that offers free phone consultations, we speak with many, many unhappy horse purchasers. In fact, "horse purchases gone bad" represent about 70% of the inquiries to our practice.

We have identified a number of characteristics that are more likely to result in unhappy (and possibly litigious) buyers. In our opinion, these factors make a sales transaction risky for the seller. The more factors that are present, the riskier the transaction.

1. The buyer is a first-time and/or very inexperienced horse owner. Often, first-time horse buyers do not know what they want or need in a horse and when they make an inappropriate choice, they blame the seller. They are also sometimes under the impression that "an honest seller should take the horse back if it doesn't work out" or that there is some type of "cooling-off period" during which they can cancel the sale.
2. The buyer doesn't inspect the horse in person. While the Internet has greatly expanded the market of potential buyers for horses, it has also presented the opportunity for people to buy horses on a whim, often resulting in buyer's remorse.
   
3. The buyer comes out to see the horse in person, but doesn't ride it. When a buyer doesn't do their homework before buying a horse, they rarely recognize it as a failing on their part and instead blame the seller for selling them a horse that is "unsuitable" or even "dangerous."
   
4. The buyer refuses the opportunity to have a pre-purchase vet exam. The buyer rarely recognizes not getting a vet check as a penny-wise, pound-foolish choice, and the second that the horse is ill or lame, the buyer claims it was a pre-existing condition that the seller didn't disclose. Note that this can happen even MONTHS after the sale.
   
5. The buyer wants to make payments on a horse that is less than $10,000. Often, such buyers do not really have the cash flow to support their purchase and therefore one little unforeseen expense, such as a car repair, can result in late or incomplete payments on the horse. Also, query whether such a buyer can really afford the high cost of horse care and the inevitable surprise emergency vet bill.
6. The buyer is buying a horse for a child, especially a very young child and/or a child with little or no riding experience. Frequently, in such instances, the parent or grandparent expects the horse or pony to be a little robot, and when it isn't, they blame the seller for selling them a horse that isn't "child safe."
7. The buyer tries to negotiate the price downward because of personal circumstances like a divorce, family illness, job loss or disability. Much like the buyer in #5, this buyer probably cannot really afford to own a horse (or they are a liar, which also does not bode well for a successful sale).
   

Labels: horse sales

One of today's callers presented an interesting question. She sold a yearling colt that she thought was a blue roan. It was certainly possible for him to be a blue roan, as his sire had been a blue roan. She told the buyer she thought the horse was a blue roan, and the buyer agreed with her. After purchase, the buyer decided that the colt was really gray instead of blue roan, and demanded his money back.

As we all know, horse sales are customarily "as is" and buyer beware, unless the seller knowingly misrepresents the horse. Here, it doesn't appear that the seller knew that the horse was really gray rather than blue roan, so the seller didn't knowingly misrepresent the horse. In fact, the buyer had not yet obtained a professional opinion on whether the horse really was gray or roan - he was just stating his opinion.

Every year, we receive a few calls on genetic mistakes. Typically, the call is from a buyer who has purchased a stallion or mare to use as a breeding prospect, and the horse doesn't turn out to be the color the buyer thought or be homozygous for a particular trait (such as the tobiano coat pattern), or the horse does turn out to be a carrier of undesirable conditions, such as overo lethal white syndrome, HYPP or HERDA. Unless the seller knows (or has reason to suspect) the horse's genetic status and misrepresents it to the buyer, the buyer will have no recourse against the seller. It is typically the buyer's responsibility to thoroughly examine the horse before buying, including any genetic testing that may be necessary.

Labels: horse breeding, horse sales

One of today's callers had bought a weanling colt sight unseen over the Internet and when it arrived, the buyer discovered that the colt still had sutures from an umbilical hernia repair surgery. The caller's vet had advised her that an umbilical hernia was considered an heritable "unsoundness" and therefore that the colt should be gelded. The caller had purchased the colt as a stallion prospect, so of course the vet's opinion was bad news indeed.

I've known a fair number of weanlings with umbilical hernias and had not previously heard it characterized as a genetic unsoundness, so I pulled out my trusty copy of Horse Owner's Veterinary Handbook by Drs. Giffin and Gore. Here's what it says:

These hernias occur in both sexes. Ligation of the umbilical cord, manual breaking of the cord, and cord infection with abscess are predisposing causes. Most umbilical hernias close spontaneously by the time the colt or filly is a year of age.

Hmm, no mention of an umbilical hernia being hereditary or an unsoundness.

I checked my backup veterinary reference, All Horse Systems Go by Dr. Loving. Dr. Loving states that:

At birth a foal may have a defect in the abdominal wall along the midline of the belly around the umbilical stump, referred to as an umbilical hernia. A one-to-two-finger-wide opening does not usually pose a problem, and many of these resolve as the foal grows. However, if the defect is more than two fingers wide, it is large enough for a loop of small intestine to slide into the hernial sac. By gently pushing on the swelling with a finger, you can usually push the bowel out of the hernia back into the abdomen. However, entrapment (incarceration) of a loop of bowel in the hernia creates the potential for the intestinal piece to lose its blood supply and strangulate. Such an event can be sudden in onset, accompanied by severe signs of colic pain. An umbilical hernia is easily corrected with surgery to prevent an acute crisis.

So, it appears that a second veterinary reference fails to state that a hernia is an unsoundness or genetic. I did a quick search on Google for "unsoundness equine umbilical hernia" and turned up some anecdotal evidence that some horsemen consider an umbilical hernia to be an unsoundness. Intrigued, I went to my small library of vintage horse books.

Granted, my selection of vintage veterinary books consists of just a few volumes. However, none of them mentioned umbilical hernias at all. They did, however, contain an interesting laundry list of unsoundnesses, many of which are hardly ever heard of today (thankfully!), such as fistulous withers, poll evil and sweeney. If you are interested in the history of horsekeeping and other animal husbandry, I highly recommend The Successful Stockman and Manual of Husbandry by Andrew A. Gardenier (copyright 1899).

Labels: horse sales

One of our callers today found themselves in a type of horse purchase dispute that arises fairly often in our equine law practice: buyer buys horse, is dissatisfied and seller agrees to resell horse, buyer is then unhappy with the resale process.

In this case, the buyer had ridden the horse prior to purchase and took a lesson from the seller (who was a trainer) on the horse prior to purchase. At the time of the buyer's rides, the buyer reported that the horse was calm and manageable. When the buyer got the horse home, the horse took off with the buyer and was too hot and spooky for the buyer to handle. The buyer contacted the seller, who agreed to take the horse back.

However, when the buyer arrived at the seller's property with the horse and asked for a refund, the seller stated that the horse was still the buyer's, but that the seller would try to sell it for the buyer. The buyer agreed (reluctantly) and left the horse there. Four months later, the seller still has the horse, the papers and the buyer's money. When the buyer threatened legal action, the seller retorted that they would counterclaim for boarding, training and other expenses.

Here, the parties have both set themselves up for a dispute. Other than trying out the horse before buying, the buyer did not do anything to protect themselves:

• No written purchase agreement of any kind
• No prepurchase vet exam. (If the buyer had had a prepurchase vet exam during which blood was drawn and kept on file, they could now test that blood for the presence of tranquilizers. If the buyer can prove the horse was drugged at the time of sale, the buyer would have a valid legal claim for fraud or misrepresentation and could seek rescission of the original sale contract.)
  
• No trainer or instructor evaluation of the horse's suitability for the buyer (a must for any novice horse buyer)
• No prepurchase trial. (Granted, the seller may not have agreed to this, but it would have been advisable to ask.)
  

The buyer and seller both contributed to the dispute by not agreeing on the terms of the resale at the time the buyer dropped off the horse. Without that written agreement, the seller will have to prove that they are entitled to a sale commission, board, training and other expenses (and if the seller successfully proves those claims, the buyer will owe the seller). There are also practically no limits on how long the seller can take to sell the horse and how diligent the seller must be in marketing the horse, so it could ultimately cost more in board, training and other expenses than the buyer originally paid for the horse. If the buyer gets frustrated with the situation and goes to pick the horse up and have someone else sell it for them, the seller may claim an agister's lien and refuse to allow the horse to leave the property until the buyer pays the seller's board and training.

Returning a horse to the seller rarely works out in the buyer's favor. If the seller offers to exchange the horse for another, the buyer is limited to the choices that the seller has available. Consigning the horse to the seller and having them resell that horse is also disadvantageous for the buyer. Typically, the seller charges board and training for the time period they have the horse, usually $500-1200/month, resulting in the seller having little incentive to sell the horse. Plus, the seller will usually charge at least a 10% commission on the sale, leaving the buyer with less than their original purchase price.

At the end of this situation, it is likely that both parties will be unhappy with the results and both will lose money.

Buyers: protect yourself by thoroughly checking out the horse before buying, have a prepurchase vet exam and get the terms of the sale in writing. Sellers: encourage buyers to be certain about their purchase by having a written sale agreement specifying that all sales are final and that horses are purchased on an "as is" basis with no warranties. If you do accept a horse to resell on consignment, put the terms in writing so that no one is surprised.

Labels: horse sales

Spring has finally arrived here in the Pacific Northwest and with the arrival of spring comes a flood of inquiries to our practice about "surprise" foals. Typically, an unsuspecting purchaser has bought a mare without knowing she is in foal. Sometimes, the mare owner doesn't even suspect pregnancy until WOW!! one morning the mare is not alone...

The arrival of a foal is not always cause for celebration. Usually, the mare owner had plans for the mare that didn't include time out for foaling. Often, these plans are time-sensitive, such as futurities. Sometimes, the mare is very young and the owner is justifiably concerned that pregnancy and lactation will stunt the mare's growth. The mare owner incurs unexpected expenses, such as vet fees, supplements and extra feed, sometimes far in excess of the original purchase price of the mare. With the average market value of a grade weanling being just a few hundred dollars, the mare owner is unlikely to recoup his or her expenses by selling the foal at weaning time.

When the mare owner calls the seller, the seller's reaction varies, but interestingly, they are rarely surprised or apologetic. Often, the seller views the foal as a "bonus," and takes the position that the mare owner should be (financially) grateful for this unexpected surprise. Sometimes, the seller has the chutzpah to ask the mare owner for stud fees! Occasionally, the seller even claims that the foal is their property and that the mare owner should care for the foal until weaning (at the mare owner's expense, of course) and then turn it over to the seller.

Does the mare owner have any recourse against the seller? If the seller knew or had reason to know that the mare was pregnant and failed to disclose that fact to the buyer, the seller has a claim that the seller materially misrepresented the mare (or even committed fraud). The buyer can seek rescission, which means that the contract is void and the parties are each returned to their original pre-sale position (seller gets mare and foal, reimburses buyer for buyer's expenses). Alternatively, the buyer can seek damages (i.e., the additional expenses they have incurred in connection with the pregnancy and foaling). In the rare instance where the seller had no reason to know that the mare was pregnant and neither did the buyer, either party may seek rescission based upon a doctrine known as "mutual mistake."

Who owns the foal? In most cases, unless the original purchase contract for the mare is rescinded, the buyer will own the foal.

Does the buyer have to pay stud fees to anyone? Typically, no. In most cases, the buyer has no contract with the stallion owner (whether it is the seller or a third party) to breed the mare and pay stud fees. However, unless the seller fulfilled his or her obligations under the breeding contract (e.g., paying the stud fees and informing the stallion owner that the mare is in foal), the stallion owner is not legally obligated to file a breeding report with the appropriate breed registry for the breeding. Without a breeding report on file at the breed association that includes the mare, the foal will generally not be eligible for registration. What that means is that it may be in the mare owner's best interest to negotiate with the stallion owner to get the foal registered, as registered foals are typically worth far more than grade foals.

Labels: horse breeding, horse sales