Warranties in Horse Sales – Separating Fact From Fiction

Krysia Nelson

Krysia Nelson

Attorney at Law

The #1 Biggest Myth in the horse industry: Every horse is sold “AS IS.”

When a horse is sold “AS IS,” the principle “buyer beware” applies. This means the buyer is under a duty to educate him or herself in advance of a purchase and conduct whatever investigation s/he deems necessary under the circumstances. If a horse is being sold “AS IS”, then “buyer beware.”

BUT, not every horse is sold “AS IS.” Unless a disclaimer of warranties is properly documented and disclosed in advance of the sale and agreed to in writing by the buyer, that horse is being sold with warranties (and lots of them). This is why written contracts are so important.

So, it is possible to sell a horse “AS IS.” There is basically only one good way to get this done: IN WRITING.

Myth #2: Anything in writing will get the job done.

If you are going to document a transaction, you have to consider what that document is attempting to accomplish. Are you merely trying to document the receipt of money? Are you merely trying to document delivery of the horse? Or, are you trying to do both those things and disclaim warranties or protect yourself from a lawsuit?

Technically, a “Bill of Sale” is a legal document that proves transfer of title. So a document that doesn’t identify the buyer or the seller does not documenting the chain of title: who is transferring title to whom?

A sales contract can include a term that it shall constitute a “Bill of Sale,” but a sales contract is much broader in scope than a “Bill of Sale.” This is an important distinction, especially when it comes to the timing of presentation. A “Bill of Sale” that isn’t trying to be a “Sales Contract” does not have to be signed by the buyer before the deal is done.

Myth #3: It doesn’t matter when the sales contract is signed.

YES IT DOES. If the seller or seller’s agent sends the buyer a sales contract after the horse has been paid for and delivered, the problem that frequently arises is that the buyer never signs it. I get calls all the time where a dispute has come up, and I’ll ask “Was there a contract?” and am told “Well, we sent them a contract after they’d paid for the horse, but they never signed it.” THE CONTRACT HAS TO BE SIGNED WHEN (or before) THE MONEY CHANGES HANDS — otherwise, it is basically a handshake deal. You cannot impose terms to a transaction after the transaction is complete.

Having said that, there is an argument that if you send someone a contract after the fact, and the contract contains terms that had not been agreed to, then the buyer’s refusal or failure to sign is irrelevant. If you have bought a horse and are then sent a contract that has terms in it that you didn’t agree to, you arguably have an obligation to contact the seller and let him know.

Myth #4: If I buy a horse and it doesn’t work out, I can send it back anytime.

It is what most non-horse people think. I have heard (more times than I care to admit) parents say, “so when my daughter discovers boys, I can send the horse back and get a refund, right?” But even some people who consider themselves experienced get confused about how long a buyer can wait before trying to “return” a horse, and even what a disgruntled buyer can do with a horse after it has shown signs of “not working out.” Basically, the rule of thumb is that if the buyer wants to send the horse back they must let the seller know as soon as possible AND stop “using” the horse in the meantime. A perfect example is when the horse comes off the van “not quite right,” but the buyer medicates it and goes to a few shows anyway…not a good call.

Myth #5: As long as I “disclaim all warranties,” it doesn’t matter what I (or my agent) said or didn’t say about the horse.

While the law allows horse traders and car dealers to engage in a certain degree of what is known as “sales puffery,” you cannot convey a horse to someone “AS IS” or “with no warranties” and expect that to protect you 100% of the time. The rule of thumb is this: a disclaimer of warranties is not a license to lie.

Fact: If not disclaimed, the following warranties usually apply to the sale or lease of a horse:

  1. Warranty of Title: if you are selling it, then you own it.
  2. Warranty of Merchantability: if you are selling it, then it doesn’t have any major defect that makes it unsalable. In horsey terms, it is “serviceably sound.”
  3. Warranty of Fitness for a Particular Purpose: if you are selling it and have reason to know what the buyer is going to do with it, then it can do the job the buyer expects it to do.
  4. Express Warranties: Your description of the horse is accurate and it can do what you say it can.

–> How to disclaim a warranty:

  • Use “AS IS” or similar language
  • IN WRITING that is conspicuous (large or bold font, capitalized, etc)
  • Be specific about what warranties you are disclaiming! You should not disclaim the warranty of title. And you cannot disclaim your description of the horse. Remember, a disclaimer of warranties is not a free pass to lie, cheat or steal.

What about “buyer beware”? What if the buyer has had the horse on trial and had it vetted?

The UCC provides that if a buyer has examined the horse as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed. So if the buyer has had a chance to do as complete an examination as desired, then in most cases (but not all), some of the warranties noted above won’t apply.

Returns and Refunds: When can a buyer send a horse back?

  1. where the horse has an issue that makes it not
  2. what was represented
  3. where the issue “substantially impairs” its value and the buyer revokes acceptance within a reasonable time after the buyer discovers or should have discovered the problem
  4. and before there is any substantial change in the condition of the horse which is not caused by the issue
  5. and before the buyer does something with the horse that is “inconsistent” with the intention to return it.

So, for example:

  • If the horse is showing and winning, then it does not have an issue that substantially impairs its value.
  • If the buyer discovers a lameness problem and tries to fix it, and keeps the horse in work for a few months and takes it to a show before saying anything to the seller, then it is probably too late to return the horse.
  • Selling or leasing the horse is “inconsistent” with the intention to return it.
  • Breeding a mare is “inconsistent” with the intention to return it.

Conclusion

In conclusion, I’ve tried to provide a useful and not-too technical summary, but the law of sales is surprisingly complex and its application very fact specific. At the end of the day, my best advice to all is always the same:

  1. Don’t lie, cheat or steal
  2. Get it in writing

Additional resources provided by the author

For access to my commentary on many equine law related topics, go to www.phelpssports.com

This article was originally published in Avvo.

 

 ©2021 by Krysia Carmel Nelson, EsqT

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