So, You Want To Sell A Horse; How Will Your Bill Of Sale Hold Up?

When it comes to horses, everyone who’s spent time around them knows that whatever can go wrong probably will. That’s especially true when you’re selling one.

The Retired Racehorse Project is hosting weekly seminars in the month of February with continuing education topics aimed at for-profit and non-profit professionals who deal with off-track Thoroughbreds. On Feb. 13, attorneys Laura Holoubek and Anne Guillory provided perspective on sales and adoption contracts.

Both Holoubek and Guillory are attorneys with Dinsmore & Shohl; Holoubek focuses on transactional law, while Guillory specializes in litigation, and both have equine backgrounds. They’ve seen a wide range of horse sales and adoptions go sideways – inclu ding people trying to return horses as long as a year after purchase. Both say the best way to protect both the buyer and the seller (or the organization and adopter, in the non-profit realm) is to have a good bill of sale or sales/adoption contract.

Here are a few takeaways from their presentation on contracts:

· First of all, there should be one (and you shouldn’t copy/paste something you got from a Google search). Having a bill of sale or sales contract isn’t just a nice way to document the process – it’s actually required by law in some places. In Kentucky, any horse sale over $500 constitutes the horse as a “good” under the federal Uniform Commercial Code and as such a bill of sale is required.

Besides state requirements, a bill of sale is a transfer of risk from seller to buyer and memorializes the exact terms of the sale. This doesn’t negate the possibility a sale could end up in litigation afterward, but it can offer a layer of protection for the seller.

The simple transfer of a horse’s registration papers does not accomplish the same thing. The Jockey Club, like other breed organizations, is a registry of a horse’s breeding but not a registry of ownership. It doesn’t purport to keep complete, up-to-date records on who owns which registered horse when, even though it has historically been true that a seller and buyer both sign the back of a horse’s foal registration papers. And a transfer of papers doesn’t lay out any terms of the sale.

Different states have different regulations governing what must be in a bill of sale, which is one of many reasons you don’t want to just repurpose something you found online. Florida, for example, requires the seller to address whether the horse has had certain types of medical procedures, including shockwave and knee blisters, within a week of the sale – likely in response to integrity requirements for public auction.

· It should clearly identify the horse and humans. Guillory and Holoubek shared a couple of example sale contracts and praised one that included not just a horse’s name, but photos of the horse from all sides. A horse’s registered name and microchip number should be included also.

The document should also clearly identify the buyer and seller, including full names, addresses and phone numbers. If there is any post-sale litigation that information can become important later.

· It should address veterinary exams. If the buyer had a pre-purchase examination done on the horse, that should be noted. If they didn’t, but were given the opportunity to do so, that should also be noted in a sales contract.

Guillory and Holoubek agreed that it’s important for the seller not to push for any specific veterinarian to do a pre-purchase exam on a sales horse. If the buyer needs help finding a local expert, they suggest the seller send a list of three professionals they’re familiar with, making sure not to include a vet who has treated the horse. The treating veterinarian can be put in a difficult position if they’re working for both the buyer and the seller, and this can cause the appearance of conflict of interest later if the sale ends up in court.

· It should be specific about warranties. Guillory noted that a good contract will say that the seller is not warranting the horse’s “fitness for a particular purpose” or its “merchantability” – referring to the horse’s athletic prospects and resale prospects, respectively. The seller should also avoid making concrete statements about what they expect the horse can do athletically or physically, because these could later be used by the buyer as “warranties” should the horse fail to live up to those projections.

Holoubek also suggests a “merger clause.”

“This clause says if it’s not in this agreement, it’s not part of our deal,” she said.

This prevents someone from trying to claim after a sale that a prior conversation or correspondence contains something different and overriding to the sales contract.

· It should also include a date and time and/or circumstances of ownership transfer. Some people write that the contract is executed on a particular day and time, while others indicate that ownership of the horse transfers when the horse is picked up by the buyer, or delivered by the seller. Guillory suggests that sellers are probably better off having the buyer or the buyer’s shipper pick the horse up and having ownership transfer at that time. Otherwise, if the seller trailers the horse and the horse gets injured in transit, there could be messy questions about who is liable for vet bills, loss of use, etc.

In the case of adoption contracts for non-profits, it’s possible ownership of the horse doesn’t transfer and only possession does. Some rescues prefer this because it more easily allows them to limit the adopter’s right to sell or transfer the horse later. This should also be made clear. The contract should also state whether the organization has the right to inspect the horse or repossess the horse if defined standards of care or other terms in the contract are violated.

· Proofread. As much as contracts may sound formal and complicated, they do need to make sense – even down to the punctuation. Guillory pointed to a statement in one of the example contracts which read the “horse will never be sold, rehomed, or given to away to a kill buyer, any auctions,” etc. But later the same paragraph addresses first right of refusal in case the buyer sells the horse – so is the statement meant to apply to all sales and rehoming, or just sale/rehoming/gift “to a kill buyer”?

· Adoption contracts can borrow from sale contracts. Although the needs of a non-profit are different, Guillory and Holoubek agree that a lot of the same elements should be common to both. Warranty disclaimers, as well as an outline of what court would have jurisdiction over any potential legal disputes, should be there. Adoption contracts should also outline prohibited acts and the method of enforcement for the contract. From there, they can add in use limitations, standards of care, inspection or update report requirements for the adopter, etc.

It's also wise for the contract to include or attach the information provided by the adopter in their application, because that makes details like the planned location of the horse, anticipated veterinary or training professionals, etc., part of the official record that both parties are signing.

The Retired Racehorse Project provides a standard bill of sale document that can be tailored to a specific situation as needed and both lawyers agreed it’s a good place to start. That is available here.