If you are thinking about buying or selling a horse on a “trial basis”, or if you are entering into a horse sale agreement with a trial period, here are five of the most important things you should consider:

1)      The Timing of the Pre-Purchase Exam.  The most important consideration in horse sales is usually, “is the horse sound”?  If the horse is not sound enough to perform the intended tasks of the prospective buyer, the prospective buyer shouldn’t be taking it “on trial” anyway.  It doesn’t happen often, but a horse can sustain an injury or get sick during even a short trial period.  Therefore, the pre-purchase exam should be conducted before the horse is ever taken by a prospective buyer to “try out.”  If a question is ever raised as to whose possession the horse was in when the horse was injured or got sick, both parties will be informed of the horse’s condition when it left the seller’s property if the pre-purchase exam is conducted before the horse leaves.  See the following posts for more information on the types of tests that should be conducted in a pre-purchase exam.

Guest Post:  Top 10 Pre-Purchase Exam Considerations

Tips for Equine Pre-Purchase Exams

2)      Insurance.  If the horse is nice / expensive, the seller should insure it for mortality and major medical before the prospective buyer leaves with the horse.  Note:  Sellers should speak with their insurance agent to make sure the seller’s insurance will cover incidents that occur during the trial period.  If the seller’s insurance will not cover the trial period, good equine insurance agents can often sell the prospective buyer a short-term insurance “binder” that will cover incidents that occur during the trial period.  These short-term "binders" may be extended by a formal policy if the prospective purchaser decides to keep the horse.  If the prospective buyer purchases an insurance “binder”, the seller should be named as additional insured.

3)      Written Purchase & Sale Agreement.  All terms of a purchase agreement “on trial” should be reduced to writing.  Among other things, the specific term of the trial period should be set out, as well as who will bear the risk if the horse is injured or dies during the trial period.  A “security deposit” can also be provided for in the agreement, along with specifics on when the seller can keep the deposit and in which instances the deposit will be refunded to the prospective buyer.  The bill of sale (which transfers title to the horse) and the registration papers should not be signed over until after the trial period has expired. 

4)      Liability Release.  The seller should consider having the prospective buyer sign a release of liability should the prospective buyer or its property be damaged during the trial period.  This will not cover injury to third parties in most instances.  A seller can procure a liability insurance policy to cover accidents involving the horse and third parties.

5)      Location of Horse During Trial Period.  A seller should have a prospective buyer agree in writing as to a single location where the horse will be kept during the trial period.  The seller can deliver the horse to said location or make other arrangements to either approve or disapprove the living conditions of the horse before the horse is released to the prospective buyer.  If the prospective buyer intends to board the horse with a third-party, it is wise for sellers to make sure that the prospective buyer pre-pays board for the trial period in advance.  This is to guard against stableman’s or agister’s liens being placed on the horse if the prospective buyer does not pay board during the trial period.

Due to all of these concerns (and others), I do not typically recommend that prospective buyers or sellers enter into "trial period" sale agreements.  In the best case scenario, a seller would allow a prospective buyer to inspect the horse as much as needed prior to the sale, either 1) on the seller’s premises;  or 2) at some other venue to which the seller would transport the horse for purposes of inspection.

This post was in response to a special request I received from a reader for a blog post on horse sales with trial periods.  I’m kind of like one of those music groups that takes requests as long as the song is in their repertoire, and I don’t even ask for tips in return!  So please contact me if you have any special requests for a blog topic.  I’m always looking for good content that will be helpful to my readers.

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As a follow-up to last Thursday’s post, Tips for Equine Pre-Purchase Exams, the following is a guest post by veteran Kentucky equine lawyer, Joel B. Turner, with valuable information concerning pre-purchase exams and other steps buyers can take to protect their interests in a horse sale transaction.

"As a ‘horse lawyer’, people usually do not call me to tell me how happy they are with their newly- purchased horses.

One of the most common calls from potential new clients (i.e. the variety that is extremely unhappy and ready to litigate) involves the post purchase discovery of a serious soundness issue. Recently during one such call I rudely interrupted the caller to interject, "Excuse me, but let me guess which joint is causing your horse an issue?" My guess was correct and the caller was dumbfounded. While it was the first for her, the same sorts of issues crop up time after time in my world.

How do you protect yourself in a situation like this? 

a) Have a veterinarian, your veterinarian, perform a thorough pre-purchase examination; and

b) have an experienced lawyer prepare a contract to close the loopholes by obtaining proper warranties/ representations from the seller. 

The combination of these two steps should provide adequate protection from the possible deceptions that so often turn an excited purchaser of a new horse into a disgruntled, if not disillusioned, victim and caretaker of an unsound horse.

Top ten pre-purchase exam considerations:

1.            Is the vet performing the exam absolutely free from any conflict of interest or possible undue influence? Make sure the vet (and any vet who is a member or employee of his/her group or practice) has never performed any services for the seller. Do not, under any circumstances, ask the seller to refer you to a vet to perform the pre-purchase exam or consult about radiographs, ultrasound images, etc.

2.            Is the veterinarian performing the pre-purchase exam willing to promptly (within 24 hours) provide a written report of his findings and make all radiographs and scans available digitally for the potential purchaser to use to obtain a second opinion, if necessary?

3.            Is the veterinarian willing to review all the vet records obtained from the seller and watch the horse being ridden (preferably by the potential purchaser) as part of the pre-purchase evaluation for soundness/coordination-neurological issues?

4.            Does the vet know how much money you intend to pay for and the purpose for which you are purchasing the horse? Share the purchase price with the vet and ask the vet to assume you are buying the horse for resale; if you want the highest level of scrutiny and are willing to pay for it, this request will put the vet on notice of your intentions and encourage a much closer look.

5.            Is the seller willing to provide all veterinary records (including all medications dispensed, radiographs, ultrasounds or nuclear scintigraphy, i.e. "bone scans" performed) for the last 18 months to two years as well as any other "therapy" records such as acupuncture, massage, shock wave, hyperbaric chamber, etc. for review by you and your vet prior to the purchase decision?

6.            Is the seller prepared to represent that, at the time of the pre-purchase exam, the horse is not under the influence of any medication, is not being treated with any substance to address any past or present physical condition experienced by the horse and is willing to allow the veterinarian to take a blood sample for drug testing to verify the accuracy of this representation?

7.            Has the horse been examined by a vet in connection with a potential purchase within the last year?

8.            Is the seller willing to represent that the horse has not had any surgery or any intra articular injections of any substance (including without limitation, corticosteroids, blocking agents or hyaluronic acid) during the seller’s ownership, other than those disclosed by the seller, or if such surgeries or "joint’ injections have been performed upon the horse and are disclosed, is the seller willing to identify all of the dates when such procedures were performed and what substances were injected into which joints?

9.            Is the veterinarian willing (and capable) to effectively communicate to the potential buyer the significance of the findings and provide an opinion as to the functional effect of these findings in writing promptly after the examination is completed?

10.          Is the veterinarian sufficiently experienced with the particular type of riding that the potential purchaser intends to do and the kind of work that the horse has been doing, to provide the potential purchaser with a high level of confidence that the vet understands the amount and level of work the horse will have to perform to fulfill the buyer’s intended use?

This list is not exhaustive and does not address such issues as pre-purchase considerations for future breeding soundness of the horse. It is focused upon the veterinarian’s performance of the pre-purchase exam for a performance horse, and the seller’s willingness to make reasonable disclosures of the horse’s condition. This list has a particularly narrow focus on determining if there are any pre-existing issues that could lead to unsoundness making the horse incapable in the future of performing the tasks for which it is being purchased.

In this era when aggressive veterinary intervention with lameness issues, (particularly with the prevalent use of intra articular injections of corticosteroids), is far more common, latent defects in horses may be hidden even from the experienced examining vet, if proper due diligence is not performed in conjunction with the pre-purchase exam. The combination of a) the seller’s reasonable disclosures in response to the purchaser’s requests coupled with, b) representations and warranties in a written purchase agreement, and c) a thorough pre-purchase veterinary exam performed by an unbiased, qualified vet working exclusively for the potential purchaser, may afford the best opportunity to avoid the heartbreak and financial loss caused by a post purchase discovery of a latent, undisclosed and undetected condition suffered by a horse after the sale is final."

 © Joel B. Turner of Frost Brown Todd LLC 2011

About the Author:  Joel B. Turner is a Kentucky attorney practicing equine-related law for the last 27 years. For Joel’s full biography, click here.

Having a thorough pre-purchase veterinary examination done prior to a horse sale is one of the best ways parties to a horse sale can prevent disputes and lawsuits. 

Dr. Camille Knopf, an equine veterinarian in Northern California, offered some excellent advice this week on the blog Ribbons and Red Tape:

Always, always, always have a pre-purchase exam performed. Regardless of length of familiarity with the horse or seller, there should always be a thorough pre-purchase exam performed to provide you with a complete understanding of the health of the animal you are purchasing.

Always have a veterinarian pull and store blood at the time of pre-purchase exam. This blood can be stored for several weeks. If you purchase the animal and later suspect the horse may have been under the influence of a medication at time of exam, the serum can be analyzed for medication and may provide you with legal recourse if necessary.

Be cautious in purchasing any horse where the current owner wants to choose the veterinarian for pre-purchase exam, discourages you from having a pre-purchase exam, or discourages you from using a veterinarian of your choice. Reason: Sadly, the horse business is not immune to fraud and neither is the veterinary world. By choosing a veterinarian that does not have a direct relationship with the seller, you can protect yourself from a potentially biased opinion."

Here are some additional tips for pre-purchase exams that can go a long way to help prevent litigation:

1.     Buyers will often ask sellers for a referral if they do not know any veterinarians in the seller’s area. It’s not always a sign that something is amiss if a seller recommends a veterinarian with whom the seller has a business relationship, as long as the seller discloses the relationship to the buyer. If a buyer asks a seller for a referral, the seller can provide buyers a list of veterinarians in the seller’s area and allow the buyer to choose from the list. If the seller has a relationship with any of the clinics or veterinarians on the list, the seller should disclose that fact to the buyer.

2.     Generally, sellers should not allow a buyer to take a horse off the seller’s property for a pre-purchase examination. The seller or their agent, employee, or representative should be the one to haul the horse to the vet for the exam, if necessary. If the buyer chooses a veterinarian that is so far away that this becomes unduly burdensome for the seller, the parties should work out an agreement on who will pay the transportation costs.

3.     As the term "pre-purchase exam" implies, it should be done prior to the purchase!  That is, a pre-purchase exam should be performed before any of the following occurs: a) the buyer takes possession of the horse; b) the buyer pays the purchase price for the horse; and c) the buyer receives a bill of sale from the seller. A seller can take a down payment on the horse to either refund or apply towards the purchase price, depending on whether the pre-purchase exam results are satisfactory to the buyer. However, it is not advisable for a seller to hold a check for the full purchase price and agree not to cash it while the buyer is inspecting the horse.

4.     Sellers should always encourage every buyer to get a thorough pre-purchase exam and to inspect horses either in person or through an agent prior to the purchase or delivery of the horse. This thorough inspection protects the seller just as much as it does the buyer.

5.     If the seller purchased the horse from a third-party, the buyer should ask the seller if the seller had a pre-purchase exam performed prior to the seller’s purchase.  If the answer is yes, the buyer should ask the seller for a copy of the results of that exam.  

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Some horse breeders, trainers, and consignors who are in the business of selling horses advertise “exchange policies” on their websites. The typical exchange policy contains language promising that a buyer can exchange a horse purchased from the seller for another horse owned by the seller of the same or lesser value within ___ days of the sale. Posting an exchange policy of this nature on the Internet is not a good idea, in my opinion.

Don’t get me wrong–good customer service is paramount to a seller’s reputation. Sellers can surely offer a buyer an exchange horse if a particular situation warrants it and a suitable exchange horse is available. But so much can go wrong if a seller offers each and every buyer the “right” to exchange a purchased horse. For instance:

1)         Some buyers do not get a pre-purchase exam. Even for buyers who do get a pre-purchase exam, they do not check for every malady, disease, or infirmity due to the expense involved. This is problematic when an exchange has been offered. It can be very difficult to tell whether the horse is returned in the same or better condition as when he left the seller’s property.

2)         Exchange policies may work great for retailers where there is price tag on each item in the store and the same items can be found on-line or in other stores. But establishing the value of the exchange horse can be difficult. The seller’s asking price is not always the horse’s fair market value. Reasonable minds can differ as to the value of a horse. Even professional equine appraisers may disagree. 

3)         A seller may not have an exchange horse that possesses all the same qualities as the original horse within the stated time frame. This leads to a lot of confusion. Does the buyer have to keep the horse until the seller obtains a suitable replacement? Does the seller have to keep and feed the buyer’s horse until a suitable replacement has been obtained by the seller? How long will it take the seller to find a suitable replacement?

4)         If a buyer thinks he can simply return the horse for an exchange after 30 days if it doesn’t work out, he may be encouraged to purchase a horse without first inspecting it or spending the money to have a thorough veterinary examination done. This is problematic for several reasons. First, as discussed above, a seller who has offered an exchange policy cannot establish that the horse is being returned in the same condition if no thorough pre-purchase exam was done. Further, a buyer may come back to seller after the exchange policy has expired and demand a refund or exchange because the horse has a soundness or health issue. The presence or absence of a pre-existing condition is then hard to prove because no pre-purchase examination was done.

Due to all of these issues, an exchange policy on horses cannot function as simply as a similar policy offered on household goods sold by Home Depot, Target, and other retailers. Instead of offering a blanket exchange policy on the Internet, sellers should take an “all sales are final” approach and encourage all buyers to get a thorough pre-purchase exam and to inspect the horse prior to purchase in person or via an agent. Taking this approach does not prevent sellers from providing an exchange horse after the fact where the circumstances warrant it. 

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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.