How to avoid horse fraud and bad horse sales. A real life lesson!

On 10.24.09, By Damon Chetson

I’ve been contacted for a number of folks recently looking for North Carolina Equine Lawyers.  In several instances, individuals have been defrauded out of significant sums of money by outright crooks.  In one particularly bad case, the person who contacted me lives outside of North Carolina.  This person purchased a horse that was advertised as being kid-safe and fit to ride.

When she received it, it was 5 to 10 years older than the stated age, cribs, is unfit for even an adult to ride, and certainly not kid-safe.  This person has spent thousands of dollars on board bills and vet bills so far. 

This person now wants to get money back from the seller… or should I say horse crooks.  The problem with such a case is two fold.  First, this is a case where the sellers are outright crooks.  They sold a horse that was substantially different from the one advertised.  And they’re difficult to trace.

So suing them will be a challenge, to say the least.  If this were a $100,000 horse, it would be worth the trouble.  But it’s not.  And so the problem for the person who called me is how to not spend good money after bad.  The person could spend tens of thousands trying to get money back, end up getting a judgment, and end up not collecting on the judgment.

No North Carolina equine lawyer is going to take this case on a contingency basis. As such, the buyer is going to have to pay out of pocket for the legal costs.

It’s a sad story.  And it happens all the time.

The solution to this problem is EquineSurety: providing reliable sales contracts, providing reliable, independent vets, and providing inexpensive, and reliable horse escrow services.

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Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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Seven Items Any Horse Contract Should Have

On 10.24.09, By Damon Chetson

1) The Parties – The buyer and seller must be clearly identified in a horse contract.  The buyer and seller can be identified in the first paragraph, and a designation like “Buyer” or “Seller” may be used throughout the rest of the contract.  But you must be absolutely sure that every time Buyer and Seller are used, they are meant to refer to the specific buyer and seller, not a general buyer or seller.

2) The Horse – The horse must be clearly described so that it is unmistakable.  If the horse has been branded or tattooed, then the number should be used as well. Include the sex, the height, the coloring, any markings, the breed, and the age.  The more specific and detailed, the better.  Designating the horse a “16 hh bay QH” is not sufficient, and will get you into trouble if you ever need to dispute the contract.

3) The price – Obviously you want to make sure that the price is included in the contract.  I understand that some times, for tax purposes, people like to do these sorts of things on a cash-only handshake.  You are obviously risking a huge loss if the horse turns out not to be what you expected, or if you don’t get delivery, or if you get a lame horse.  Make sure the price is in the contract; you can worry about the tax consequences later.

4) Delivery Terms – It’s important to designate in the contract who will be responsible for arranging, paying for, and delivering the horse to the seller.  In addition, it’s important to designate at which point the risk of loss shifts from the seller to the buyer.  If the horse is injured during transport, then it’s important to know who is responsible.  If the buyer arranged transport, the buyer is probably liable once the horse leaves the seller’s property, but not always.  It’s always better to have these terms specified in the contract.

5) Warranties – Contracts for the sale of horses should have various warranties that describe the warranties and representations made by the seller to the buyer.  Since most contracts also have a “merger clause” which specifically disclaims any statements made before or at the time of the sale that are not written out in the contract, verbal representations, if not accurate, may not be cause for a civil complaint.  But if the seller has warranted that the horse is fit to ride, fit to jump, and fit to perform at such and such level, and the horse clearly is not capable of those things, then a warranty clause can make getting back your money much easier.

6) Escrow Clause – At EquineSurety, we’re big on escrow clauses and escrow services.  These are specific instructions in a sales agreement or contract that tell a third party – an attorney or escrow agent – when to disburse money deposited by the buyer in the escrow account to the seller.  An escrow account gives the seller confidence that the money has been tendered by the buyer to the escrow agent or lawyer.  And an escrow account gives the buyer confidence that he receives the horse he paid for before the money is released to the seller.

7) Choice of Forum Clause – Many horse deals happen across state lines.  A choice of forum clause can iron out where a civil action would be filed if there were a dispute.  Even better than a choice of forum clause, is an arbitration clause.  At EquineSurety, we are developing horse arbitration services that will soon be available to horse buyers and sellers who wish to avoid court altogether, and have their dispute resolved by professional arbitrators.

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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Protecting Horse Trainers and Barn Managers from Liability

On 10.22.09, By Damon Chetson

Here’s a little video on the importance of horse waiver forms, and having a horse waiver form that really protects the horse trainer, or the horse barn manager, from liability.

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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Who Owns This Horse? Horse Contracts and Agreements

On 10.21.09, By Damon Chetson

Unlike a car – which needs to be registered with a state DMV which will issue a title certificate – or a home – which has a deed registered with the county in which the home is located – many horses do not have title documents.

Yes, horses may be registered with a breed association, but many are not. And given that horses are valuable, as well has loved, animals, it’s really remarkable that so many horses lack “title documents.”

The issue of “who owns the horse” is important for a number of purposes. For instance, if the horse is on a trainer’s property, and the trainer owes money to a company, and the trainer gives the company a lien on the trainer’s property, one question is whether the company has a lien on the horse.

Another question arises when a horse is purchased on installments. The question is when does ownership transfer to the buyer. Does ownership transfer at the first payment, with the seller retaining a “security interest” in the horse? Or does ownership transfer at the last payment, once the buyer has fully paid for the horse.

A carefully drafted horse sales agreement or horse contract can resolve many of these issues, so that there is clarity to both the buyer and the seller, but also to other parties, about who owns a horse and when ownership passes. In addition, if there is ever any future doubt about the ownership of the horse, a sales contract can be used to verify ownership of the animal.

People always hope that things will go as planned. But contracts exist because often life doesn’t go as planned, and having a written contract helps clear up doubt about what the parties intended at the time of the sale when the parties were on speaking terms!

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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Equine Law and Trial Law are not the same thing…

On 10.20.09, By Damon Chetson

TheHorse.com has an excellent profile of the trial attorney who won Tom Selleck’s recent case against a horse seller who did not divulge that the horse he was buying was lame.  Selleck won about $190,000 – the cost of the horse – and settled for an additional $75,000 in punitive damages.

Two interesting points about the article. First, the jury selected had no one who was familiar with the horse industry.  That was intentional; Selleck’s lawyer wanted a jury without preconceived ideas about the horse industry and a jury that was open to persuasion. But one of the hurdles for Selleck was to convince a jury of average citizens that fraud in the sale of a horse was serious enough to require them to award him compensation.

The second interesting point: that the trial attorney had to convince the jury that a buyer could have been defrauded even though the buyer never directly spoke with the seller.  Most people cannot imagine buying a $2,000 item, let alone a $120,000 horse without every talking to the seller.  And yet every single day thousands of horses are sold in the United States where the buyer and the seller never meet, never talk, and never discuss the price or the quality of the horse.  All discussions go through trainers.

In the end, Selleck had an excellent trial attorney, and enough money to see through the trial to the end.  The average horse buyer or seller isn’t so lucky, or wealthy.  Even if the successful conclusion of the case includes awarding the injured party attorneys fees, most cases never reach trial and many attorneys will not take these cases on a contingent fee basis.

It’s by far better to stop horse fraud at the beginning of the transaction, through the use of horse sales agreements or horse sales contracts, escrow accounts, and direct buyer-seller negotiations so that each side knows what it is buying or selling.

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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What is Horse Escrow, How Does It Work?

On 10.18.09, By Damon Chetson

You’ve probably used escrow services many times in your life, maybe without ever even realizing it.

For instance, most lenders require the homeowner to pay not only the loan payment each month, but an additional amount that is “escrowed” – i.e., placed into an escrow account – to pay for homeowners insurance and, perhaps, property taxes. 

That ensures that the money is available when the property tax or insurance bill comes due so that the mortgage company can pay those taxes and ensure that the property is free of any government liens that may be placed on it, and that the homeowners insurance always stays current.

Essentially, the escrowed money is held for you, on your behalf, by the mortgage company or real estate attorney to ensure that funds are available to pay these bills when the time comes.

Horse escrow accounts are similar.  They are a tool that can be used by buyers and sellers to make sure that, upon satisfactory delivery of a horse, the escrowed money paid by the buyer can be quickly and easily dispersed to the seller.

Escrow accounts serve an added protection for the buyer and the seller.  Because sometimes a broker or a trainer negotiates the sale of the horse, escrow accounts ensure that both sides of the deal – the buyer and the seller – are fully aware of the sales price of the horse, and that no price padding has taken place.

How is money dispersed in an escrow arrangement? Either both sides agree that the money should be released and sign off on the release of the money.  Or the money is released upon fulfillment of the stated terms of the escrow agreement. 

Escrow agreements can reduce the problems associated with the sale or purchase of a horse, even where both parties are friends and well known to each other.  Escrow agreements can preserve friendships, in fact, by having a third party – the attorney who holds the money is escrow – manage the disbursement of funds.

And escrow agreements can ensure that when the horse is delivered, or made available to the buyer, that the money exists to pay the seller without hassle.

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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What is a horse lawyer?

On 10.16.09, By Damon Chetson

In reality, there’s not a specific area of the law called “equine law.”  Equine law is not usually taught in law school.  That’s because the issues involved in equine law are covered in other areas of law: tort law (if someone is injured by a horse or at a barn), insurance law (involving claims against insurance policies), contract law (if someone has sold a horse, and the other party hasn’t paid; or if someone has paid, and not received the horse they bought), criminal law (if someone has committed criminal actions, for instance fraud, in the buying and selling of a horse), property law (involving the purchase or sale of horse property), and so on.

But while equine law involves many different areas of law, it is important, when dealing with horses and the law, to find an attorney who is aware of the specific nuances and issues that arise when dealing in equine, horse, or equestrian related matters.

EquineSurety is fully aware of the myriad issues that arise in horse-related transactions: from price padding and fraud in the sale of horses, to liability issues involving equine activities, to the use of escrow accounts to protect buyers and sellers, to issues related to criminal fraud. 

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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Horse Escrow Services: How to protect yourself against fraud.

On 10.15.09, By Damon Chetson

Horse buyers and sellers too often “do a horse deal” on the shake of a hand. The buyer pays by check. The seller agrees to deliver the horse.

In many cases, the deal goes fine, both parties are happy, and the buyer enjoys the horse. Everyone lives happily ever after.

But in some cases, things go badly. The seller never delivers the horse.  Or the horse is delivered lame.  Or the wrong horse is delivered.  Or, in spite of guarantees by the seller, the horse is not the quality or fitness as advertised by the seller. 

Or, consider the alternative.  The seller delivers the horse as promised, but the buyer decides not to pay.  Or, in spite of getting the horse the buyer wanted, the buyer says the buyer will pay, but pay less. 

That’s when the friendly relations between the buyer and seller break down.

But there’s a way to prevent these sort of misunderstandings, confusion, and problems that can turn a good horse deal into a very bad experience.

By using a horse escrow service. An escrow account holds the buyer’s money until the parties agree to the release of funds, or until conditions attached to the escrow agreement are satisfied. 

The buyer is protected by having the money maintained in a neutral, escrow account until the horse is delivered, or made available to the buyer.

The seller is protected by having the money maintained in a neutral, escrow account before the horse leaves the seller’s property, or is made available to the buyer.

In addition, a simple escrow account ensures that both parties are fully aware of the price being paid for the horse.  Escrow accounts are a simple, inexpensive, and transparent way of making sure both parties are satisfied about the delivery of the horse and the delivery of the sales price.

And because escrow accounts can be managed electronically, there’s no need for a lengthy and cumbersome process that slows down the sale.

For a flat fee, EquineSurety provides escrow services are among the best ways to protect yourself in the sale of a valuable and cherished horse.

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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Different Kinds of Horse Fraud

On 10.13.09, By Damon Chetson

There are obviously very different kinds of horse fraud.  The horse fraud that involves people responding to Craiglist ads and offering to “buy” your horse if you would just cash their certified check and send the proceeds to Nigeria.  This is just standard internet fraud schemes, applied to horses.

At Equine Surety, we’re interested in stopping a different kind of horse fraud, fraud masquerading as a legitimate sale of a horse among a buyer, a trainer, and a seller.  We’re interested in stopping the price padding that often goes on when a buyer asks her trainer to find her a horse for $50,000, a trainer finds the horse for $40,000, but the trainer tells the buyer it costs $50,000 and pockets the extra $10,000 plus the trainer’s commission. 

This is fraud, and it’s what Equine Surety seeks to stop through the use of contracts, escrow accounts, arbitration, and other legal tools that put transparency back into the buying and selling of horses, and ends corruption, theft, and, yes, fraud!

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About the author

Damon Chetson

Damon Chetson is an attorney and founder of Equine Surety, an association that seeks to eliminate horse fraud by providing horse lovers, horse owners - buyers and sellers - horse trainers, and horse professionals with the necessary legal tools protect themselves against fraud, deceptive practices, and unethical behavior in the horse industry. EquineSurety is a project of The Chetson Firm, PLLC, a Raleigh, NC-based law firm that focuses on equine law and criminal defense law. In his spare time, Mr. Chetson lives on his small farm with his wife Catherine, their two horses, and three bulldogs. Mr. Chetson can be reached at (919) 352-9411 or by email at damon@equinesurety.org

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