Pre-Purchase Trial? Get It in Writing!

"An oral contract is not worth the paper it's written on." - Movie mogul Samuel Goldwyn.
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"An oral contract is not worth the paper it's written on." - Movie mogul Samuel Goldwyn.

What if that sweet horse your daughter fell in love with is not trustworthy?

child_horse

So, horse buyer, you've found your dream horse at last! And, horse seller, you're about to make that sale you've been hoping for. But there's one hitch: The prospective buyer wants to take the horse on trial.? Hmm . . . .

From the buyer's standpoint, a trial is a great way to more fully evaluate the suitability of the horse before plunking down a chunk of change. For the seller, it may conclude the sale. Besides, what could possibly go wrong?

Answer: Plenty!

From the Jekyll-and-Hyde horse that appeared to be the model of equine decorum at the seller's farm only to become a holy terror when it arrives at your barn, to the buyer who portrays herself as a candidate for sainthood but who turns around and absconds with your prized horse never to be heard from again, and every scenario in between, pre-purchase trials are fraught with potentially serious problems for both parties to the transaction.

That's why a written and signed contract that addresses foreseeable contingencies, including worst-case scenarios, is a must when horses are taken on a trial basis.

Notice that we said "written and signed." Why? An oral contract is merely a promise, whereas a written and signed contract serves as concrete proof that promises were made and agreed to and, thus, has the teeth of legal enforceability. An enforceable contract means that if one party breaks (breaches) the contract, the other can be awarded money to compensate for their financial loss.

Without a written contract, proving that promises were made can be impossible. it's amazing how often people who breach contracts claim not to remember making those promises or will frankly lie and go back on their word. Therefore, the best way to deal with a verbal contract is to avoid them altogether.

When it comes to pre-purchase trials, it's important to be aware of the most likely problem areas:

If the horse becomes sick, injured or dies during the trial, what are the duties of the parties involved?

Who arranges for veterinary care?

How soon will the horse's owner be notified?

What happens if the horse's owner can't be informed quickly?

Who pays for veterinary bills or for the loss of the horse?

Another area of concern is the potential for the horse to cause property damage or personal injury to the prospective buyer or a third party. In both scenarios, it's wise to require that full insurance be purchased for the trial period. That means equine medical and mortality, loss of use, liability and care, custody and control. (See September, October and November 2012.)

If the buyer intends to board the horse during a trial period, make sure that board payment arrangements with the farm owner have been addressed beforehand and that these arrangements are explicitly stated in the contract. Should the board not be paid, the stable owner could be entitled to place a lien on the horse, which could stand in the way of the horse being returned to its owner at the end of the trial.

Though it rarely happens, an unethical buyer could steal the horse. Be sure that the contract provides for the purchase of insurance to cover the potential loss of a horse along with strict provisions detailing where the horse is to be kept and whether it is to be allowed off those premises. The theft of a horse would likely result in both criminal and civil actions arising. In both cases, a written and signed contract that explicitly delineates the parameters of the transaction between buyer and seller would be crucial evidence in court. Don't think you need a contract? Consider This . . .

Taking a verbal promise is like not checking the teeth to verify the horse's age.

Taking a verbal promise is like not checking the teeth to verify the horse's age.

ANATOMY OF THE CONTRACT. Committing a pre-purchase trial agreement to writing in the form of a contract need not be done in impenetrable legalese, but it should be thorough and written in words that are easily understood. it's advisable to have a lawyer who is knowledgeable in the horse business draft or at least review and trouble-shoot the contract.

The preamble of the contract should list the full names of the seller and buyer (if these involve business entities such as a corporation or LLC, their names should also be listed) along with current addresses. There should be an accurate description of the horse (including name, breed, sex, color/markings, height and age). Additionally, the address of the farm where the horse is to be for trial should be stated, along with the trial start and finish dates.

The body of the contract should be specific and include:

1. Sales Price/ Security Deposit/ Method of Payment/Refunds. If your agreement is to purchase the horse following a trial period, the purchase price should be stated along with the method of payment (cashier's check, cash) and when the payment is to be made. If the seller requires a security deposit, terms such as the amount, the application of the security deposit to the final sale, or the way a refund of the deposit is to be handled in the event of an unsuccessful trial should be included. Additionally, there should be a statement that upon full payment of the purchase price, the seller grants full legal possession of the horse to the buyer. If the sale includes tack, registration papers, Coggins or other certifications, list those, too.

2. The Trial Period: This part of the contract should spell out the nuts and bolts of the trial with great specificity. Include the following:

a. The dates of the trial period.

b. Who will transport the horse to the trial location and back to the seller should the trial fail and who will pay the costs.

c. Who will be responsible for the care of the horse during the trial and that good animal husbandry shall be practiced at all times.

d. The stabling/pasturing arrangements for the horse during the trial.

e. Whether the horse will be permitted to be taken off the premises of the farm during the trial.

f. What feed and supplements shall be fed to the horse and who will provide them.

g. Whether insurance to cover the value of the horse along with liability insurance is to be required and who will purchase it. Additionally, to protect a seller from a stableman's lien for a buyer?s non-payment of board, the financial arrangements and responsibilities for boarding the horse should be clearly stated.

h. Who is to ride the horse during the trial, what discipline the horse is to be used for, what tack is to be used and who will pay for the costs of a trainer or instructor during the trial period. Any type of prohibited activity (such as jumping) should also be clearly stated.

i. How the horse is to be cared for in illness or injury (including vet care, costs and seller notification) along with who will pay for the horse and the amount of payment should the horse die.

j. If the horse is to undergo a pre-purchase exam, state the name of the veterinarian, the tests that may be included and who will pay. Many experts recommend that the pre-purchase exam be performed prior to a horse leaving on trial. That way, should the horse become lame or sick, the problem can be identified before the horse is placed in the hands of a buyer.

Along with any other specific agreements that are made between a buyer and seller, the contract should include statements representing that the horse in good health and is current with its vaccinations and Coggins. The seller should also state that they are, in fact, the owner of the horse and that the horse does not have any liens on its sale. The contract should also specify who will assume the risk of the loss or injury to the horse.

Additionally, the contract should address the manner in which it will be legally enforced should a dispute arise. Provisions such as the use of alternative dispute resolution (such as arbitration), the payment of attorney's fees and the venue in which a legal action will be brought if necessary should be stated. Further provisions indicating that both parties have read and fully understand it are also beneficial. Finally, the contract should be signed, dated by both the buyer and seller, and witnessed or notarized.

BOTTOM LINE. If you think you're too busy to bother with a contract, then you're too busy to deal with the legal problems that will occur when the other side fails to abide by your oral agreement.

Finally, if you're dealing with a person who won?t sign a written contract, consider it a huge red flag and walk away, no matter how much you like the horse.

Website Extra: We've placed a PDF PRE-PURCHASE TRIAL CONTRACT March 2013 on our website with this article. For subscribers only. See related article on Equine Escrow accounts.

Article by Contributing Writer Susan Quinn, Esq.