Equine Sales Agreements
All too often clients present us with form contracts they got off the internet or from a friend. With the law one size does not fit all. Many states have Equine Activity Liability laws but California does not. Issues particular to the individual arise in each sale and the cost of having an attorney review your contract will well outweigh the cost of problems that can arise after the sale including the cost of litigation. The critical terms that should appear in a horse sales contract are:
- The Identity of the Parties. This may seem simple but make sure you are really buying the horse from the actual owner. If the owner is listed as a corporation or LLC, an attorney can verify whether such an entity really legally exists. Another thorny issue arises when a horse is sold to a minor. In California a contract with a minor may be rescinded yet horse show associations often list horses as belonging to minors. An attorney should be consulted so that these types of issues can be sorted out.
- The Identity of the Horse. Verify the registration and show record of the horse and make sure the contract has a detailed description of the horse that includes not only its barn name, show name and registered name but also its age, size, breed, color, markings and gender.
- Title. It is important to clearly spell out how title will be documented. Does the horse have registration papers? How do you properly record this particular horse’s transfer? Do transfers need to be reported to other performance, futurity or breed associations?
- The Price and Terms. The agreement must clearly say not only the horse or pony’s price but exactly when that payment is going to be made. If payments are going to be made it is important to have a lawyer prepare a proper promissory note and security agreement. Horses are considered goods under the Uniform Commercial Code and a horse sale should be a properly documented secured transaction. Additionally, if interest is charged on an installment basis, it is critical that you consult a lawyer to make sure that a legal rate of interest is being charged and the contract does not violate usury laws.
- Insurance. There are several types of insurance that need to be considered in connection with an equine sale. What company will carry the policy? What is their rating? What is the deductible? Will the seller be insured if the horse injuries someone while on trial? What risks does the policy cover?
- Possession. Often a buyer obtains the horse or pony under a separate trial agreement. The sales agreement must work together with the trial agreement so that there are no contradictions in terms. The date the horse is to return from trial if it is not purchased must be clearly indicated in the agreement and the cost and penalties of holding the horse past that date should be in the agreement. The risk of loss or injury during transport also needs to be agreed upon and spelled out in writing.
- Contingencies. Clear deadlines and terms must be set forth regarding the inspections and tests that will be performed on the horse. For example, if the inspections require the removal of the horse’s shoes, arrangements should be made so that the buyer arranges for and pays for the shoes to be immediately replaced.
- Warranties. What types of warranties are being made. If the horse is in foal is there a live foal guarantee that needs to be transferred? Will there be warranties regarding title or condition of the horse? Is the description itself a warranty (for example, is the horse’s age and breed being guaranteed?)
- Injury Liability. Since California does not have an Equine Activity Liability statute it is particularly important that your sales agreement contain a clear release. Both buyer and seller should know where they stand in the event of injury damage or death.
- Commissions. The identity of each person taking a commission on the horse should be clearly disclosed and all agents and trainer’s involved in the transaction should sign off on the truth of the commission statement to avoid fraud claims later.
- Remedies for Breach. The agreement should clearly set forth what will happen in the event of a breach.
- Dispute Resolution. Litigation can be costly for all concerned. You may want to consider including a mediation or arbitration provision in your contract.
- Choice of Law. Sometimes contracts involve parties from different states. The contract should spell out what state’s law will be used to interpret the contract.
- Attorney Fees. If something goes wrong and there is a lawsuit the winner may end up being a loser because the agreement did not contain an attorney fee clause. Discuss with your attorney whether it is in your interest to have an attorney fee provision in your sales contract.
We assist and represent buyers, sellers, sales agents and trainers throughout California, including Agoura, Atherton, Beverly Hills, Bonita, Bonsall, Burbank, Calabasas, Chino, City of Industry, Cupertino, Del Mar, El Dorado, Elk Grove, Fallbrook, La Canada, Lake View Terrace, Livermore, Lodi, Los Alamitos, Los Angeles, Malibu, Menlo Park, Mission Viejo, Monterey, Moorpark, Murrieta, Newhall, Newport Beach, Norco, Orange, Palos Verdes, Paso Robles, Petaluma, Pleasanton, Pomona, Ramona, Rancho Murieta, Rancho Santa Fe, Riverside, Rolling Hills, Sacramento, San Diego, San Luis Obispo, San Juan Capistrano, San Marcos, Santa Barbara, Santa Rosa, Santa Ynez, Somis, Sonoma, Sylmar, Temecula, Thermal, Tustin, Valley Center, Ventura, Vista, Westlake Village, Woodside, and Yorba Linda.