Horses sell every day, but when it comes right down to it, most people involved in a horse sale are not sure what facts the seller must disclose. Likewise, there are certain rules that govern a buyer’s conduct, most importantly being the buyer’s duty to ask relevant questions. The law creates a fine line between a seller’s duty to disclose versus right to remain silent, and a buyer’s duty to ask. The general rules are as follows:
Rule No. 1: Thou Shalt Not Lie or Mislead a Buyer.
A seller cannot lie or mislead a buyer. However, sellers do not have to disclose every known fact regarding a transaction. A seller generally does not commit fraud by remaining silent about most aspects of a horse sale. Most courts around the nation hold that, with some exceptions, silence will not amount to fraud, especially where the defect or problem could be readily discovered by the buyer through a routine inspection. However, failure to disclose information may amount to fraud in the following circumstances:
- If the seller agrees in the purchase agreement to disclose all relevant facts, then the seller must disclose such known facts to avoid fraud. Silence will not serve as protection to fraud in this situation.
- If the seller and buyer have a confidential or fiduciary relationship, the seller has a duty to disclose all relevant facts. Thus, a trainer has a duty to disclose to his or her customer all relevant facts regarding the transaction; otherwise the trainer could be liable for fraud.
- Where the seller knows the buyer is mistaken to certain facts, the seller must correct the mistaken belief. An example is when the potential buyer of a mare states that they intend to breed the mare next year but the seller knows that the mare is not able to carry a foal due to a problem not discernible from a normal veterinarian examination. Under these circumstances, the seller must clear up the mistaken belief of the buyer in order to avoid fraud.
- If a seller knows the buyer wishes to purchase a horse for a particular purpose, the buyer must disclose all facts relevant to whether the horse can meet that purpose. For example, take the family seeking a horse for their 8 year old daughter to ride at horse shows. If the seller knows that the horse is hard to control, and thus potentially dangerous at horse shows, they must disclose this fact in order to avoid fraud or other liability.
- When the buyer asks a seller a question, the seller has a duty to give a correct response. An incorrect or misleading response may constitute fraud. If the buyer asks the seller if the horse has had any illness in the past, the seller must give a truthful answer.
Rule #2: Thou Shalt Be Specific In Thy Contract.
Sellers can limit themselves, to a certain extent, by including an “as is” statement in the purchase agreement. This statement typically says that the buyer takes the horse as it is, without any warranties.
The seller may protect themselves from certain statements made prior to the sale by including a merger clause in the purchase agreement. A merger clause says that anything intended to be in the agreement is contained in this agreement, and this agreement contains all provisions of the sale. Things not expressly included will not be considered part of the agreement. Take for example the instance where there is a merger clause in the purchase agreement, and the seller has represented to the buyer that the stallion purchased is breeding sound. If the buyer wishes this to be a warranty of breeding soundness, the buyer should have the warranty specifically included in the purchase agreement.
Rule #3: Thou Shalt Accept Responsibility for Thyself.
Buyers should be aware that they too have duties. Buyers must conduct a reasonable inspection of the horse they purchase. A reasonable inspection varies depending on the value and the intended use of the horse. If you purchase a high dollar show horse, you arguably have a duty to secure a detailed veterinarian inspection of the horse, including x-rays. If you purchase an expensive mare for breeding purposes, you should secure a veterinarian examination which includes palpation and other fertility tests to ascertain the mare’s breeding capacity. However, if you purchase a pleasure riding horse intended only for recreational use, your duty to inspect will be much lower. The amount of inspection required will vary depending upon the custom in your breed or sport, and the intended use.
Rule #4: Thou Shalt Protect Thyself.
Self-protection in horse sales is no different from other forms of self-protection. View the transaction as an educational experience — if you don’t consummate the deal, you’ve educated yourself and the negotiation partner, and you’ve employed good business practice. However, if you follow certain guidelines, you should be able to capably thread your way through the negotiations in flying colors:
As the Buyer:
- Ask questions. Document the answers to these questions.
- Tell the seller what you intend to use the horse for and ask if the horse would be suitable for such use.
- Specifically ask if there are any known physical conditions which would hamper the horse’s performance in this capacity.
- Always use a written purchase agreement.
- If there’s something that is vital to the sale, such as soundness, breeding capacity, etc., be sure to have it included in the contract.
- If there is a “sold as is” clause or merger provision in the purchase agreement, make sure that all important statements or guarantees made by the seller are included in the purchase agreement.
- Properly inspect the horse. The level of inspection depends upon the intended use, breed and sport standards. If you are not sure what type of inspection is necessary contact a professional breeder, trainer or equine veterinarian in your area.
- Test the horse’s suitability for its intended use.
As the Seller:
- Answer all questions truthfully.
- Inform the buyer, especially if the buyer is inexperienced, that they have the option to obtain a veterinarian exam of the horse if they desire.
- Always use a written purchase agreement.
- Include in the contract “sold as is” language and merger provisions.
- If the buyer requests to have guarantees or statements included in the contract, determine if you want to be held to those guarantees or statements. If you are willing to be held to such guarantees, include them in the purchase agreement and complete the sale.
Rule #5: Thou Shalt (And Must) Use A Written Contract For Any Horse Sale Exceeding $500
In our contract negotations, we are all constrained by a legal policy called the “Statute of Frauds”. Part of each state’s Uniform Commercial Code, this policy requires any contract for sale of goods exceeding $500 to be in writing in order to be enforceable. What does that mean? If you sell a horse for $501 without a written contract, either party may rescind (that is, refuse to honor the contract, return the horse, and/or demand the return of either the horse or the money). In other words, a verbal contract enables the parties to return to the position they each occupied before the contract was entered.
CONCLUSIONS: FOLLOW THE RULES. Adhering to the above policies will not only keep you out of trouble, but maximize your ability to close the best deal for all concerned.
© Denise E. Farris, Esq. (January 25 2022) This article may not be reprinted or reproduced in any manner without the consent of the author. Contact: Denise Farris, Farris Legal Services LLC. Email: [email protected]. Telephone: (913) 220-6203.
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