A lease is a legally enforceable agreement usually between two parties that defines the relationship between the owner (“lessor”) and the party or parties intending to rent (“lessee”) the property in question. A lease specifies the subject matter of the lease, outlines the terms upon which the property is made available by the owner to the lessee, and defines what will happen to the property upon either successful or unsuccessful completion of the lease.

Leases are often more difficult to draft than sales contracts. And that also goes for horse leases. The reason for the difficulty is that a horse lease contemplates an ongoing relationship in which the use of the horse is transferred to another person, but the ownership of the animal remains with the “lessor” or the person leasing out the horse.

In a sales contract, the horse is sold, and title to the horse goes to the new person. Obviously there can be problems with a sales contract, particularly around the area of fraud or misrepresentation. But because a sales contract is a one time occurrence, and doesn’t envision a continued relationship around that horse, a sales contract is easier to draft.

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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.

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.

But how much should an escrow arrangement cost? The answer is: not much at all. At EquineSurety, we offer escrow accounts starting at $250, or 1 percent of the sales price of the horse for horses that are priced more than $25,000.

In addition, EquineSurety is prepared to complete the transaction entirely electronically, so that money is deposited into the escrow account, an electronic confirmation is sent to both the buyer and the seller. Money is distributed either by a mutual agreement of the buyer and seller, or once the terms of the escrow arrangement have been satisfied.

Importantly: EquineSurety makes the process easy, electronic, and affordable, so that the escrow arrangement helps, rather than hinders, the sale of the horse.

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!

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.

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.

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. 

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.