Enforcability of "Soundness Guarantees"

A Texas caller bought a horse without getting a pre-purchase exam. The caller has emails from the seller that say the horse “never took a lame step” and was “always sound” while the seller owned the horse. The horse became lame about two months after the caller got him home, and the caller’s veterinarian speculated that the lameness was due to a condition that pre-dated the caller’s purchase of the horse. The caller wants to reverse the sale because the seller “guaranteed” the horse to be sound.

First, the horse trade is one where the phrase caveat emptor (“buyer beware”) applies. It is the buyer’s responsibility to get a pre-purchase exam before buying a horse. Every pre-existing condition cannot be determined in a routine pre-purchase exam. Thus, it is the buyer’s burden to ask the seller specific questions about soundness and suitability for the buyer’s intended purpose, and obtain access to all prior veterinary records on the horse from the seller prior to taking possession of the horse.

Unless the seller expressly promises a refund if the horse is found to be lame, or otherwise expressly guarantees or warranties that the horse is sound, a court will likely not find an express warranty of soundness to have existed. There are no implied warranties on livestock or their unborn young in Texas, as provided in Texas Uniform Commercial Code Section 2.316.

In the absence of an express warranty of soundness, the buyer will have to pursue a fraud action against the seller. To prevail on a fraud claim, the buyer must prove (among other elements): 1) the condition causing the lameness was there when she bought the horse (through a veterinarian’s opinion); and 2) the previous owner knew about the condition at the time of the sale and intended to defraud her.

Plaintiffs lawyers also like to bring horse sale actions under the Texas Deceptive Trade Practices Act ("DTPA") or similar consumer protection statutes in other states.  The DTPA is attractive to plaintiffs because they allow for treble damages and attorneys' fees in some cases.

Fraud and DTPA cases are often "tough sledding'" because the buyer must prove the seller knew about the defect at the time the sale took place.  See Tex. Bus. & Com. Code Sec. 17.46(b)(24). 

Proving the seller knew about the defect is hard to do if there are no vet records or other evidence pre-dating the sale showing a diagnosis of the condition or treatments related to the condition.  

Take aways:  When buying a horse,

  • get a pre-purchase exam done by a vet you know and trust;
  • get a written Purchase & Sale agreement on each horse you buy. This agreement should contain a disclosure by the seller of all known faults with the horse;
  • and ask the seller specific questions about past injuries and illnesses;
  • ask the seller who their vets are and obtain releases from the seller so that you can get copies of prior vet records on the horse. Most veterinary practices adhere to confidentiality practices that prevent them from providing a buyer with acces to records that pre-date the buyer's purchase of the horse; and
  • if you think the seller is guaranteeing a horse sound, get the guarantee in writing.

 

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Comments (3) Read through and enter the discussion with the form at the end
Rachel McCart - May 21, 2010 7:05 PM

Another great article, Alison! I also deal with this topic frequently. Not only is it often difficult to prove that the condition was pre-existing, it's also very difficult to prove what the seller knew at the time of sale. I've done it, though, by subpoenaing records from all vets in the seller's area - sometimes, you get lucky.

I did also have success arguing that the implied warranty of merchantability applied in one case where the seller was clearly a "merchant" (they were a broker who imported horses from Europe). We were able to show that the horse's coffin bone fracture and OCD lesions were old and certainly predated the sale, based on testimony from an expert veterinary radiologist.

Paul Husband - May 21, 2010 7:07 PM

Excellent post Alison. Clear and concise.

In California, in order to prove fraud, a plaintiff also has to prove "reasonable reliance" by the purchaser on a material misrepresentation by the seller.

In California, the implied warranties of fitness for intended use and merchantability can apply to horse sales, if the respective factual prerequisites exist, and they are not excluded by contract.

Merchantability -- will the horse pass in the trade as a horse -- will almost always be found -- unless someone is selling a goat and calling it a horse.

Fitness for intended use can be a problem for a seller if the seller can be shown to have known that the buyer is relying on the seller's skill and judgment to supply a suitable horse.

Alison Rowe - May 21, 2010 7:44 PM

Thanks Rachel and Paul for the complimentary remarks about the post.

Rachel--I know what you mean about the subpoenas. Sometimes you get lucky. In Texas, there is a pre-suit discovery procedure where you can file a petition to take an oral deposition or a deposition on written questions and ask for documents. I have recommended this procedure to some people to see if they have a case. In Texas, no matter how bad the defect was, it's not actionable if the seller didn't know about it absent express warranties. That's because our UCC excludes livestock from implied warranties.

Paul--In Texas, a plaintiff must also prove reliance, material misrepresentation (or omission), and intent do induce the purchase. These issues usually aren't hard to prove, so I didn't address them in the post.

On Merchantibility in California, I wonder if you tried to sell someone a horse that really wasn't the horse contracted for, would that apply? I mean, if you could prove through DNA or otherwise that the horse purchased was not the horse contracted for? I've dealt with a similar issue on a shipped semen case (they shipped the wrong stallion). But implied warranties were not raised.

On Fitness for Intended Use--you still have to prove the seller knew it was unfit in Texas. Is this different in California due to the fact that implied warranties apply to livestock?


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