15 Essential Elements of an Equine Sales Contract
In the competitive world of equine sales, ensuring a smooth transaction is crucial for both buyers and sellers. A well-drafted equine sales contract establishes a clear understanding of the terms and conditions of the sale, thereby protecting the interests of all parties involved. This comprehensive list of 15 essential elements will guide you through the process of creating a legally binding agreement, covering everything from horse identification and warranties to payment terms and dispute resolution. By including these critical components in your contract, you can confidently navigate the complexities of equine sales and foster a successful, transparent, and hassle-free transaction. Of course, nothing in this article replaces hiring an equine lawyer for your transaction.
Nothing in this article constitutes or replaces advice from a licensed attorney. Please have your contract reviewed by an equine lawyer.
#1 Define the Parties
Although it seems obvious, each contract should start by defining the buyer and seller. For individuals, identification is easy: use their full legal name. If the horse is being sold or bought by a business, the seller or buyer should be the name of the business followed by "by [the name of the person signing on behalf of the business], its [capacity of signor]."
For example: Jim's Horse Sales, LLC by Jim John its: Authorized Member. In that example, Jim's Horse Sales, LLC is the seller/buyer business, and Jim John is the person signing on behalf of Jim's Horse Sales. Jim John is a member of Jim's Horse Sales, LLC and is authorized to sign on behalf of the business.
#2 Describe the Horse in Detail
One of the major failures of equine sales contracts is a vague description of the horse being sold. Most sales contracts will include the stable name, registered name, and a brief description of the horse's identifying markings. In a dispute over identity, this incomplete description may not be good enough. A detailed description of the horse will include its stable name, registered name, height, age, sex, sire/dam, color, identifying markings, and any microchip or organization registration information (i.e. USEF horse number). This information will allow you to match the horse described in the contract to the horse you receive and is important for potential future dispute resolution.
#3 Include the Price
Most equine sales contracts will include the price, but that doesn't make it any less important! The price is one of the most essential terms in a sale contract. The contract should also specify how the purchase price will be paid. Purchase prices can be paid in lump sums or installment/partial payments. However the purchase price is being paid, the terms must be clear and unambiguous. It can also be important, depending on the value of the sale, to include the method of payment, particularly to require a wire transfer of the purchase price. Finally, if the purchase price is paid in installments, the timeframe or due date for each partial payment should be incorporated into the terms of the contract. Being detailed in your payment terms and purchase price can eliminate later misunderstandings and save both the buyer and seller legal fees.
#4 Don't Forget Registration Information
Some horses aren't registered and that's okay! If the horse being sold is not registered, your sale contract may not mention registration at all or it may mention registration just to specify that the horse is not registered.
For registered horses, it is crucial to include the name of the association and any other identifying information. Sales contracts should also require the seller to transfer registration and deliver any electronic or physical registration certificates to the buyer. For sale contracts with multiple installment payments for the purchase price, the seller may want to hold onto the registration certificates until payment of the final installment, giving the seller more security. If so, this should be specified in the contract. If the horse is registered with the USEF, this information should also be included in the sale contract. All registration information should be discussed in the sale contract to allow for transfer from seller to buyer.
#5 Include Pre-Purchase Veterinary Exam Information
A pre-purchase veterinary (PPE) provision is one of the more complex, but crucial components of an equine sales contract. There are too many nuanced details about pre-purchase exams to include in this article. But a short summary can be provided. For a thorough understanding of the PPE provision, contact Wood Kull or another equine lawyer for explanation and examples.
In a nutshell, a PPE provision can be two things, depending on whether the buyer wants or has already had a pre-purchase veterinary exam of the horse. (1) A PPE provision in a contract executed before the pre-purchase exam itself should include the timeframe of completion and reasons for rescinding the contract. (2) A provision if the buyer has already had an exam or does not wish to asks the buyer to acknowledge their choice to have a pre-purchase veterinary exam or not. If the buyer did have a pre-purchase exam, the provision might include language acknowledging the satisfaction of the buyer with the results of the exam.
PPEs are one of the most litigated aspects of equine law and, more specifically, equine sales contracts. Because PPEs deal with horse's soundness and suitability, they can be litigated in many circumstances, making an appropriate and enforceable PPE provision even more necessary for every equestrian buyer and seller.
#6 Include Warranties and Representations
Each contract should include certain representations and warranties by the parties. At the very minimum, the seller should warrant that they own the horse and have the ability to sell the horse/enter into the sale contract. The buyer should represent their satisfaction with their PPE and/or their choice to waive a PPE. Further, it is important to disclaim any warranties of fitness for a particular purpose and other implied warranties.
#7 Bold and Capitalize Your AS IS Language
In order for AS IS language to be enforceable, it must be clear and conspicuous. It is best to have your AS IS language capitalized and bolded to draw attention to the fact that certain warranties are being disclaimed.
#8 Discuss Amendments
Each sales contract should discuss the process of amendments. Generally, an amendment provision requires amendments to be in writing and signed by both parties. This eliminates later oral modification of the contract, which can be especially important for warranties and representations.
#9 Allow for E-Signatures
Each sales contract should include a provision that allows for e-signatures. E-signatures are quick and confidential. The biggest benefit of an e-signed contract is that each party automatically receives an electronic copy of the fully executed contract in their email. Using an equine lawyer will allow for you to utilize their confidential e-signature software to quickly execute all of your contracts.
#10 Include Contact Information for Notices
At a minimum, the contract should include both the buyer's and seller's legal address. Legal notices for defaults may need to be sent physically. It can be helpful to include the parties' cell phone numbers or email addresses for faster communication. Email addresses must be included for parties to utilize e-signature software.
#11 Merge all Previous Oral Understandings
Although technical, it is important to include a provision merging all previous oral understandings and superseding any previous agreements, oral and written, with the sales contract. Buyers should only rely on what is written and guaranteed in the sales contract, not sales puffing from a Facebook ad; including a provision like this will require the buyer and seller to only rely on the representations contained therein. This can be important, especially when the buyer and seller have discussed the horse for a period of time. The written sales contract should supersede all previous conversations and understandings about the horse and sale.
#12 Choose your Law
Choosing law is most important in sales contracts with a buyer and seller who live in different states, especially when the contract is signed electronically, so neither party leaves their home state. By choosing which state's law applies, parties can avoid costly legal fees later on. In addition to choosing the applicable law, it can also be beneficial to choose the venue, or where any lawsuit interpreting the contract would be brought. Generally, venue for horse sales contracts are chosen by county. Clearly defining the applicable law and appropriate venue eliminates fights over law and venue later on, saving both parties legal fees. A provision specifying applicable law and appropriate venue must be negotiated between the buyer and seller.
#13 Outline Possible Liabilities and Inherent Risks
Incorporating a list of inherent risks in an equine sales contract is an important measure to protect both the buyer and seller from potential disputes and misunderstandings. Horses, as living creatures, are unpredictable and can subject their riders to a variety of risks. Your sales contract should include a list of inherent risks associated with equine activities.
In Michigan, your contract should at least include the four inherent risks defined in Michigan's Equine Activity Liability Act. MCL 691.1661 et seq. A sales contract written by an equine attorney will include the MEALA inherent risks and a list of further potential risks associated with equine activities to thoroughly protect their client from liability.
#14 Comply with Your State's Equine Activity Liability Act
Your state's Equine Activity Liability Act may have language requirements. All drafters of equine sales contracts should be familiar with their applicable Equine Activity Liability Act and the requirements thereof. In Michigan, the MEALA requires all contracts related to equines to include specific warning language. The warning language required in Michigan is:
Under the Michigan equine activity liability act, an equine professional is not liable for an injury to or the death of a participant in an equine activity resulting from an inherent risk of the equine activity.
Check your state's Equine Activity Liability Act to see if there are any language requirements applicable to your equine sales contract.
#15 All Parties must Sign and be Older than 18 Years Old
For the sales contract to be enforceable, the contract needs to be signed by both the buyer and the seller. Contracts signed only by one party are only enforceable against that party. If the party is a business, an authorized representative should sign to bind the business.
It is well settled law that minors cannot bind themselves in contract, with very few exceptions. This means every sales contract should be signed by a person over the age of 18. Even if the horse will be considered the child's horse, the parent or guardian should sign any sales contracts.
Making sure each party signs and is over 18 will make sure the valid portions of your contract are binding on and enforceable against both parties.
In conclusion, a carefully crafted equine sales contract, incorporating these 15 essential elements can significantly enhance the buyer's and seller's experience, providing a solid foundation for a successful transaction. By addressing crucial aspects such as horse identification, warranties, payment terms and dispute resolution, both parties can mitigate potential risks and understandings. As you embark on your equine sales journey, remember that a well-drafted contract is not only a protective measure but also a testament to professionalism and commitment to a transparent, fair, and mutually beneficial sale.
Nothing in this article constitutes legal advice. Please contact an equine lawyer to review your sale contract.