WARRANTIES In Horse Sales

from Elite Equestrian magazine Jan/Feb 2022 issue

Warranties in Horse Sales – I promised what?

When you sell a horse, most sellers understand that a written Equine Bill of Sale is best practice. If the deal has complexities, such as payment over time, trial period or lease-to-own, then a written Equine Purchase and Sale Agreement is a further best practice. However, what many sellers do not realize is that the form of the Equine Bill of Sale and the form of the Equine Purchase and Sale Agreement are very important. In a separate article, we discussed certain disclosure and language requirements in the Bill of Sale required in certain jurisdictions. Notably, Florida contains some of the most expansive requirements in those areas.2

Here, I address another area of horse sales: the warranties a seller gives a buyer when selling a horse. Some of these warranties exist whether or not any warranty is stated in the Bill of Sale or Purchase and Sale Agreement. You now thing, “can I be accused of giving a warranty if I did not put one in the equine sale transaction documents?” Short Answer: yes. With that “yes” comes a host of legal responsibilities. Now, with that thought in mind, let’s unpack the various warranties that might exist when you sell a horse:

While a recipient of information about a horse will not have to investigate every piece of information furnished, he or she is responsible for investigating information that a reasonable person in the position of the recipient would be expected to investigate.

1. Express Warranties.

These are the warranties you commonly see in horse sale contracts. Promises that the seller has the capacity to sell the horse, that the horse is currently sound, that the horse is not subject to any lien or claim by a third parson, that the horse is as identified, that the horse is identified correctly. You can make any express warranty you want in your documents, not just those listed. The previously listed warranties are warranties that are the easy ones to give as a seller, and are the warranties that many purchasers will want to see included in the transaction documents.

2. Implied Warranties.

a. Implied Warranty of Fitness for a Particular Purpose

An implied warranty, as opposed to an express warranty, is a warranty that arises from the particular circumstances of an equine purchase and sale transaction. Under many state laws, including Florida, an implied warranty of fitness for a particular purpose arises where a seller has reason to know a particular purpose for which the horse is required and the purchaser relies on the seller’s skill or judgment to select or furnish a suitable horse To enforce that type of implied warranty, however, a person must be in privity with the seller and must have justifiably relied on the seller. Many states have codified into their Uniform Commercial Codes the requirements to for that understanding and right to enforce to exist.

What that means is that while a purchaser who is inexperienced with horses likely can justifiably rely on a professional horse seller, the same is not true when an inexperienced purchaser employs a team of equine professionals and equine veterinarians to assist the purchaser in examining the horse. In that case, the purchaser is relying on the purchaser’s own team, not upon the statements of the seller. The same is true when you have an equine purchase and sale amongst equals, such as when one equine professional sells to another equine professional.

There is often a defense to such an implied warranty, so do not confuse justifiable reliance on a representation by the seller, which is not the same thing as failure to exercise due diligence. One does not necessarily translate into the other. While a recipient of information about a horse will not have to investigate every piece of information furnished, he or she is responsible for investigating information that a reasonable person in the position of the recipient would be expected to investigate. So it follows, if a purchaser does not exercise due diligence when purchasing a horse, that may defeat any claim of the implied warranty of fitness.

b. Implied Warranty of Merchantability.

Under this type of implied warranty, each sale of a horse comes with it the implied promise that the horse was at least of of average quality as similar horses in that category of horse, and the horse was fit for its intended and ordinary purpose. This implied warranty Continued on page 72

is distinguished from the prior implied warranty as this is a warranty that the horse is at least an average horse for the discipline and class for which the horse is sold to compete. The jumper sold, for example, need not be the guaranteed winner at 1.40, just that it is at least an average horse at that level. Conversely, there is no warranty implied here that the horse will perform flawlessly or even always safely, given the inherent dangers of sport horse competition.

3. Disclaimer of Warranties – “As-Is” is not sufficient.

Warranties can only be be disclaimed by conspicuous and clear language A oneliner: “This horse is sold “as-is” would not be sufficient to disclaim a warranty stated, or otherwise implied, by the circumstances of the sale. Do you want to legally disclaim some or all warranties ? Call a knowledgeable equine lawyer and work out the proper language and scope of the disclaimer for your transaction documents. Do not be penny-wise, pound-foolish about committing some resources to having a proper set of an Equine Bill of Sale and and Equine Purchase and Sale Agreement. A lack of proper disclaimer in your documents is a sleeping land mine, waiting to blow up on a seller at a future time, should an issue arise with the horse after sale.

4. Who Can Enforce a Warranty?

The law of most states, including Florida, is that to recover for the breach of a warranty, either express or implied, the plaintiff must be in privity of contract with the defendant. “Privity” means that parties contracting together – the seller and purchaser. An agent of a purchaser, such as a trainer who is not a purchaser or part purchaser of the horse, is not in privity of contract, and thus not entitled to enforce any warranties by the seller in that contract, unless the seller’s trainer is a “third party beneficiary” to the contract.

That does not mean that, because the trainer was going to earn fees from the boarding and training of the horse the trainer, the trainer is in privity with the seller and entitled to enforce the warranties. Those are incidental or consequential benefits, and a person who is not a party to a contract may not sue for breach of that contract where that person receives only an incidental or consequential benefit from the contract.

Rather, a non-party to a contract, such as a trainer, may only qualify as a third-party beneficiary when the following elements are met: (1) existence of a contract; (2) the clear or manifest intent of the contracting parties that the contract primarily and directly benefit the third party; (3) breach of the contract by a contracting party; and (4) damages to the third party resulting from the breach. Therefore, unless equine Bill of Sale or equine Purchase and Sale Agreement specifically states that the seller and purchaser both agree that the purpose of the sale is to benefit the trainer, the trainer would not be able to enforce any warranties against the seller.

A trainer or other agent merely expecting benefits such as fees from the sale commission, training or boarding fees, or competition prize winnings, would not convert the trainer into a third party beneficiary with rights to enforce the warranties, if any, of the equine Bill of Sale or equine Purchase and Sale Agreement. This is because the primary purpose of the horse sale transaction is to benefit the seller and purchaser. For the same reasons, a downstream purchaser, such as the next purchaser after the first purchaser, would not be able to enforce any warranty upon the original seller, because of a lack of direct connection, a lack of privity, with the seller.

A trainer or other agent merely expecting benefits such as fees from the sale commission, training or boarding fees, or competition prize winnings, would not convert the trainer into a third party beneficiary with rights to enforce the warranties, if any, of the equine Bill of Sale or equine Purchase and Sale Agreement.

5. Conclusion.

Be aware that when you sell a horse, if you want to disclaim some or all warranties, you must do it in written form, expressly and correctly. Find yourself a knowledgeable equine lawyer, in the jurisdiction where the equine purchase and sale is to occur, and develop the correct set of transaction documents for that equine purchase and sale.

1. Avery S. Chapman, Esq. is the Founding and Inaugural Chair of The Equine Law Committee of The Animal Law Section of The Florida Bar. The principal Founder of Equine Law Group, LLC, located in Wellington, Florida, Mr. Chapman provides legal counsel to members of the national and international equine industry and equestrian owners and athletes on a wide range of matters including litigation and business, as well as disciplinary matters. He is also a national speaker and writer on equine law issues, a member of the Palm Beach County Bar Association Professionalism Committee and the Professional Ethics Committee of the American Bar Association, as well as past legal counsel to and a Governor At Large of the United States Polo Association, a 501(c)(6) organization. Mr. Chapman may be reached through www.equinelawgroup.com. 2. See Fraud In Horse Sales, https://www.floridabar. org/the-florida-bar-journal/fraud-in-horse-sales-floridasrule-5h-and-unfair-and-deceptive-acts-by-equine-sellersagents-and-others/ EE