When Selling a Horse, Think Full Disclosure!

25 03 2014

We have all seen it before with friends, family and maybe even ourselves:

Stage One: Seller decides to sell a horse. Buyer wants a horse, comes and tries Seller’s horse and likes it. Buyer has pre-purchase veterinary examination done on the horse (or maybe does not have one done if the horse has low purchase price that keeps it from being cost effective to have a pre-purchase examination). The pre-purchase examination, if done, does not show anything significant. Seller says he or she knows of no problems with the horse and Buyer then buys the horse from the Seller.

Stage Two: Buyer gets the horse to his home stable or boarding barn and within the first few days or weeks Buyer notices health or behavioral issues with the horse. Buyer is unhappy and contacts Seller about returning the horse for a refund. Or Buyer asks Seller to reimburse Buyer for expenses which Buyer has incurred in his or her efforts to correct the health and/or behavioral issues with the horse. Seller saw no problems with the horse before Buyer took the horse away and, in fact, may believe that something about the Buyer’s boarding situation or treatment of the horse is giving rise to this health or behavioral issue and so declines to give Buyer a refund or to reimburse Buyer for expenses. So here we are – at an impasse. What next?

Stage Three: this stage is where things usually get sticky. If the Seller has provided veterinary records to the Buyer and given the Buyer an opportunity for a pre-purchase examination and either one was not done – or the one which was done showed no issues- then as long as the Seller has disclosed anything which might be reasonably relevant to a Buyer (injuries, illnesses, bad habits, bad behaviors, rider injuries and the like), than the Seller needs to decide whether he or she wants to take the horse back. Sometimes Sellers love the horse, can afford to and would rather take it back and give the Buyer a full or partial refund than have the horse with someone who does not want the horse. But if that is not the case and a Seller makes full disclosure and gives adequate opportunity for the Buyer to have the horse checked out, then a Seller is certainly within his or her rights to refuse to (a) unwind the sale transaction or (b) reimburse the Buyer.

That being said, if the Seller has not been totally forthcoming about all issues with the horse about which the Seller is aware, then the Seller may want to refund the Buyer and take the horse back or face some difficult questions in court if the Buyer pursues the Seller in that venue. Seller’s reputation could also be at stake if Buyer chooses to share his unpleasant story with third parties. Sometimes it is more important to a Seller to maintain a stellar reputation in the horse community than it is to prove he or she is right in a particular sales transaction with a particular horse. That being the case, sometimes a Seller will refund money and take a horse back even when he or she really has done nothing wrong from a legal perspective. Lots of different factors come into play in these situations. Is the Buyer well known as a good, honest person? Is the Buyer known to be difficult? Is the Buyer a family member or family friend? Is the horse widely known for being chronically lame or is the horse widely known to be tough as nails? Is the veterinarian who did the pre-purchase examination a friend of Seller who will be sued for a faulty pre-purchase examination if the Seller refuses to unwind the sale? Can the horse’s issue be rehabilitated by the Seller? There are lots of questions the Seller needs to ask him or herself. Depending on the answers to these types of questions, the Seller may decide to refund the Buyer – or not refund the Buyer.

If a Buyer requests a trial period with the horse before finalizing the sale, I advise Sellers to check out the location where the Buyer is taking the horse to be sure the Seller is comfortable with the personnel on duty at that location and the overall safety of that location for the horse. Absent some reason not to, Sellers with horses out on trial should require that the horse on trial be on individual turnout (alone with no other horses) during the trial period so that the risk of the horse being injured is minimized as much as possible. There are two schools of thought on trial periods. Some Sellers feel like it weeds out earlier the people who will end up wanting to send the horse back and it’s a good idea which saves time in the long run. Other Sellers feel that their horse is placed at risk when it leaves their farm and they do not want to risk injury to the horse (or liability for the horse should it injure someone or something) by allowing a trial period so they do not allow them. Both schools of thought are valid, so it again is up to the individual Seller to determine what makes the most sense to him or her on this issue.

How to minimize the number of these sticky situations for Sellers?

While we cannot guarantee a Seller will never have a disgruntled buyer even if every precaution in the world is taken, there are things Sellers can do to help prevent these situations. If the Seller can afford it and it makes financial sense (i.e., the more valuable the horse, the more sense it makes), I recommend having the horse examined by a veterinarian before listing it for sale so that you can produce a vet report to potential buyers when they approach you and advertise the horse “as is, where is, with all faults,” while offering potential buyers the opportunity to have the horse examined for themselves as well. Also good protection for Sellers is an excellent sales contract drafted by an equine lawyer in the Seller’s state which sets out in detail the terms of the sales transaction, provides that Buyer has had the opportunity to have the horse examined by a veterinarian and also has a place in the contract for the Buyer to initial a statement which says: (a) the horse is being sold “as is, where is, with all faults;” (b) if the Buyer declines to have an examination done, Seller is not responsible for any issues that arise after the sale; and (b) Seller has disclosed all issues with the horse which are known to him or her, but that Seller is not making any guarantees with regard to the health or behavioral issues of the horse. Such language in a sales contract will help to protect Sellers somewhat and will hopefully remind Buyers of the importance of a pre-purchase veterinary examination of a purchase prospect.

Next month’s article will be about what to think about when you are buying a horse!

If you get into a bind and need assistance or just want to ask some questions to avoid getting in a bind, feel free to email me at dburch@rl-law.com. I often will answer a short and simple question for free if I have time and know the answer off the top of my head! If you don’t hear back from me quickly, it’s not because I don’t love you or think you have a great question or because I don’t know the answer (usually), I’m probably just really busy and haven’t had a chance to email back. And you can always buy the first hour of my time for $250 (my usual hourly rate for 2014 is $350). Lots of folks will save up all their equine (and some corporate or real estate) legal questions and short documents and sit with me for an hour and we will do as much as we can during that hour and it’s only $250. You can check out my Twitter feed @nchorselawyer as well as our firm’s Equine Law Group web page at http://www.rl-law.com/equine if you’re interested, and yes, in addition to providing what I hope are interesting and informative stories, this blog and the Twitter feed referenced above are also (in one way or another, I guess) an advertisement for legal services.

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