When buying or selling a horse it’s important to have a written contract to protect both parties. This way, everything that has previously been discussed and all relevant information about the purchased horse will appear in the contract, making everything clear and avoiding possible misunderstandings.
A simple contract covering the essential points of the purchase agreement will be enough to make the sale official. These are the basic things a standard contract needs to include:
- Identify the parties. The parties are the buyer and seller. Make sure addresses, phone numbers, and Social Security or Federal tax-identification numbers are present. The seller on the contract must be the same person listed on the horse’s registration papers. If seller and registered owner are different, the seller’s authority to sell the horse could be questioned. If a partnership or corporation owns a horse listed in a breed registry, the registry may require a specific person’s, or more than one person’s, signature.
- Identify the horse. Include name (official passport’s name), year of birth, sex, color, markings, breed, life number or microchip number.
- Date of sale. This is important if there’s a later dispute: In many cases, the date determines the time that a warranty or statute of limitations begins to run. It could also have tax implications for computing capital gains and depreciation.
- Price and terms of sale. State the sale price and applicable tax if necessary. If the buyer and seller agree to some form of trade, or trade and exchange of money, spell it out clearly.
- Risk of loss. State when the buyer takes on responsibility for injury or death of the horse. Typically, risk of loss passes either at the signing of the contract or when the payment is fulfilled.
- Warranties. In many cases, horses are sold without any promises by the seller regarding ability or fitness. If you’re the buyer and there’s an oral statement by the seller that you’ve relied on in deciding to buy, make sure that that statement is in the contract. It’s customary to have a veterinarian examine the horse in a prepurchase exam instead of offering a soundness warranty. In that case, the contract should state that the buyer agrees on the purchase of the horse after the findings of the veterinarian have been communicated to the buyer and are included in the final examination report.
- Prepurchase exam. If the buyer decides against the prepurchase exam, include a notation in the contract stating that the buyer declined to have a prepurchase exam performed on the horse. This documentation helps protect the seller if the unexamined horse turns up lame shortly after the sale, unless the seller can be shown to have lied in answering direct questions about soundness. Therefore it’s also recommendable to include in the contract that if a blood test is done and it’s doping positive, the contract will be invalid and de full amount must be reimbursed to the buyer.
- Signatures. All parties to the contract should sign it on every page. The sale of a horse owned by two or more owners requires all owners’ signatures. All buyers must sign as well, because the parties to the contract are the people responsible for paying for the horse.
HOW BUYERS CAN PROTECT THEMSELVES:
- Ask questions. Document the answers to questions.
- Tell the seller what you intend to use the horse for and ask if the horse is suitable for such use. Ask if there are any known conditions which would hamper the horse’s performance.
- Use a written purchase agreement.
- If there’s something that is vital to the sale, such as soundness, breeding capacity, etc., make sure it’s included in the purchase agreement.
- Properly inspect the horse. The level of inspection depends upon the intended use, breed and sport standards. Therefore it’s recommendable to arrange a prepurchase exam to make clear in which state will the horse be bought.
- Test the horse’s suitability for its intended use.
HOW SELLERS CAN PROTECT THEMSELVES:
- Give as much information to the buyers about the horse as possible.
- Answer 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 “as is” and merger provisions in the contract. If the buyer requests to have guarantees or warranties included in the contract, determine if you want to be held to those guarantees or warranties.