One of the most common issues seen by equine lawyers is fraud or concealment in horse sales. Whether you are a buyer, a seller, an agent, or a trainer it is important to understand and appreciate the duty of disclosure in a horse sale.
“As Is” Does Not Mean Buyer Cannot Be Sued
In an equine sales or leasing agreement the words “as is” does not necessarily protect you from a lawsuit. If a seller or lessor does not disclose known problems they can later be sued by the buyer or lessee. In California, the owner of a horse has a duty to tell the truth about the animal they are selling or leasing and to disclose “important facts” to before the sale or lease is complete. “Important facts” can include facts regarding the horse’s health, soundness and temperament. Under California law, liability for fraud arises when a seller:
This is why it is important to find a lawyer who is an expert in California equine law to review your horse sales contract or equine lease agreement whether you are a buyer, a seller, a lessor or a lessee.
The Role of the Agent
When horse trainers and horse sales agents get involved, the potential for trouble grows because an agent has a special relationship known as a “fiduciary relationship” with their client. A fiduciary relationship exists when one person has a special obligation to protect the interests of another person. A sales agent in an equine sales transaction or horse lease agreement has a duty to protect the interests of their client. In some cases, a trainer has this same special duty to protect their client, who is relying on their experience and expertise. If a horse trainer or agent takes a commission from both the buyer and the seller (or both the lessor and lessee) this creates a potential conflict of interest. If an agent represents both sides of the transaction it is called a “dual agency.” In California and in many other states a dual agency relationship must be disclosed to both sides in writing. Although for many trainers and agents it may be tempting to collect a commission from both the buyer and the seller, the increased liability that comes from representing both sides may not be worth it.
The Duty to Disclose
In many horse sales and horse leases, the buyer and seller (or lessor and lessee) may never even meet each other, but this layer of separation does not protect a seller or horse owner from liability. If you are a seller or lessor, it is important to not only tell your agent all the known problems with a horse, but to make sure that the agent provides this information to the prospective buyer or lessee. The only way for a seller to truly protect themselves from an overenthusiastic agent is to put the disclosures in writing and make sure the buyer acknowledges, in writing, that they have read the disclosure. If you end up in court, a judge or jury will decide on a case by case basis what facts are considered “important” so for a horse seller it is prudent to err on the side of over-disclosure if you are not sure what to disclose. Do not let an over-enthusiastic trainer or sales agent discourage you from protecting yourself. All too often a well meaning seller will authorize the release of veterinary records but the records somehow never make it into the hands of the buyer. This is one of the reasons why we advocate the use of an escrow in high value horse sales and leases but, unfortunately, the horse industry has still not evolved to this level of transparency. In the absence of an escrow, an experienced horse law attorney can arrange and document disclosures as well as supervise other paper work such as horse transportation agreements, registration with the appropriate breed or performance registry.
Documenting the Agreement
From a buyer’s perspective it is also important to document, in writing, what you have or have not been told about a horse. Just because you are buying a horse “as is” without a warranty does not mean you are waiving your right to ask questions and get truthful and complete answers. Ask for the names of each veterinarian or veterinary hospital that has been known to treat the horse - even for vaccinations and maintenance injections - and request all records from these medical providers, not just x-rays or earlier pre-purchase examinations. If a horse has been insured, do not be afraid to ask for records of previous insurance claims relating to the horse.
Ask Questions
Although many horse sales and leases are conducted now the same way they were back in the days of the wild west, California law has advanced and imposes obligations on buyers, sellers, agents and trainers. If you are buying or leasing a horse it is better to ask too many questions than not enough. Your investigation should include:
Despite even the most thorough investigation, a buyer cannot always protect themselves from an unscrupulous seller and that is why it is best to document what you have and have not been told. Whether you are a buyer, a seller or an agent, the advice you learned as a child still holds true: “Honesty is the best policy” and is the best way to avoid a lawsuit.