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April 11, 2012

Purchasing Your Dream Horse: Get It In Writing!

You wouldn't buy your dream horse property without a proper contract. Why would you buy your dream horse without one? Photo by Anne Kitzman/Fotolia.com.

Recently, my father bought my mother her dream house. I was pretty involved in the purchase of the house, probably more involved than any 
other attorney for a residential closing, because I work for free for my parents (though my father insists that I'm a "prepaid attorney" and not a “free attorney”).

It's curious that when buying a dream horse, which is almost as important as (or, to some people, even more important than) buying a dream house, we don't put much in writing. There isn't a more modern industry practice, nor is there as much protection readily available as there is when buying a house.

For example, many states require sellers to disclose known material defects of a residential house, with a few exceptions, and some states even have standardized disclosure forms. Furthermore, there are companies available that not only perform title searches but also offer title insurance. Unfortunately, we don't have these legally required disclosure forms for horses nor can we purchase title insurance. So what to do?

As a lawyer, I stand behind the cliché of "get it in writing" and advise using a purchase agreement. I understand that this isn't always standard practice in the equine community, but with all the broken hearts and empty pockets that result from a deal gone wrong, we might want to consider implementing detailed purchase agreements as a matter of procedure.

And of course, as a lawyer, I advise that you consult an attorney when drafting, negotiating and signing a purchase agreement for state specific laws/requirements and for legal advice specific to your situation.

In theory, a purchase agreement protects both the buyer and the seller because a well drafted purchase agreement that has been negotiated fairly usually clearly states items such as: what was represented, what was promised, how much the buyer is paying in total, and who pays what to whom in commission (this is especially important if your state has disclosure laws regarding commission and dual agency). It also includes any known injuries or health conditions of the horse, who is the legal owner(s), and/or who may be entitled to attorney’s fees in case a disagreement arises.

While some of this information may be very sensitive (such as commission or known health issues), you can add a confidentiality clause into the purchase agreement prohibiting any party under most normal circumstances from disclosing the terms of the agreement, even if the deal falls through.

Do Your Research

As a buyer, try to get copies of all of the documentation you can beforehand, such as the horse's passport, any previous vetting reports, veterinary records, a copy of the terms of the Bill of Sale (I've seen Bill of Sales that disclaim almost all representations and warranties regarding the horse, which doesn't leave the buyer with much protection at all), etc. to help protect yourself. Make sure you are comfortable with the terms and conditions in the Bill of Sale and that it accurately describes the horse you're buying.

Look up the horse by its U.S. Equestrian Federation number, if it has one. If there are any discrepancies between what the seller is telling you and what USEF records reflect, ask for an explanation.

Though keep in mind that discrepancies in the USEF record don’t automatically mean that the seller is dishonest or lying. For example, I looked at a mare in the past, and the seller told me she was 9 years old. But USEF showed that the mare was only 6. However, since I happened to know the previous owner and the mare’s history, I knew that the seller was correct. However, I still asked the seller to explain the discrepancy to cover my bases.

As a seller, you likely don't want someone with buyer's remorse claiming you misrepresented the horse or didn’t disclose facts surrounding the sale as an excuse for demanding his money back. If you have a detailed purchase agreement, it could help you prove that you did disclose a fact or defect that the buyer is claiming you didn’t tell him about.

The seller and buyer can also agree on all representations that are being made by the seller and relied on by the buyer. For instance, the seller might say the horse is competitive at 1.45 meters, has no known major injuries or is of a certain lineage. The purchase agreement states all such representations and consists of the entire understanding and agreement between the seller and buyer. This could potentially be a very helpful provision if the buyer later claims you made a representation that you didn’t and that isn’t stated in the purchase agreement.

As a horse lover, I understand that we sometimes get so caught up in the idea of our potential new mount that we don't always ask all the questions or perform all the research we should. However, asking questions and doing research at the outset will save a lot of heartache at the backend and will help prevent your dream horse from turning into a nightmare. Don't be shy about asking questions and getting things in writing (and doing your own research). You're paying with real money; you should get real answers upon which you can rely.

A purchase agreement isn't in and of itself pro-buyer or pro-seller. It may be more common for buyers to ask for them than for sellers to offer (perhaps due to a few unscrupulous sellers who have given horse sales a bad name), but the aim of the purchase agreement should be to keep everyone honest.

The last thing you want is to start out buying your dream horse or selling a horse honestly and ending up in litigation. While horses are legally considered property, we know they are much more than that. They are our teammates, our teachers, our students, our friends, our loved ones. Thus, litigation regarding horses can become very emotional, and both parties may take things personally, especially when reputations are at stake.

Not all litigation involves a villain. Not all sellers are malicious who committed fraud. Not all buyers are disgruntled people with unreasonable expectations who are never satisfied and want a refund. Sometimes people just disagree on what was said, what was represented, and what happened.

And when we're talking about a lot of money, or a lot of hopes and dreams, (or all of the above!) things can get heated pretty quickly. If you don't have anything in writing, it will likely be an expensive (and potentially drawn out) he said-she said war. And if it ends up in a jury trial, you just never really know which way it will go. So save yourself potential heartache and get (or put) everything in writing.

In the next column I’ll explore some specific buying scenarios as well as situations with sellers who have to field questions and demands from many prospective buyers.

If you have any specific questions, please feel free to leave them in the comments section or email the author via The Chronicle of the Horse.

DISCLAIMER: This article is intended for informational purposes only and does not constitute legal advice. You should not rely or act upon any information contained in this article without seeking the advice of qualified legal counsel.

Janis J. Chang is a sports and entertainment lawyer licensed in Florida, New York and Texas. She enjoys writing about equine legal issues and would welcome questions via the comments.

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