While car commercials abound during this time of the year, most equine enthusiasts dream of a different kind of horse power. It’s no surprise that horse sales tend to increase this time of year. In recent years, trial periods in horse sales have become an increasingly popular option. However, while trial periods are designed to avoid problems with equine sales, they can create some particular issues of their own. Generally, trial periods arise in one of two situations: (1) cautious buyers who want to make sure the horse they are interested in is a “good fit” before committing to the purchase; and (2) consignment sales where one individual (such as a horse trainer) takes a horse from the owner with the intention of selling it to a third party buyer, and then passing the money along to the owner (minus a fee).
In either situation, usually no money is paid up front and the potential buyer (or, in the event of a consignment, the consignee) takes possession of the horse for a designated period of time. Too often this process is done on a handshake, and there is no written contract covering the trial period. Of course, no one anticipates problems, but there are some common situations that frequently occur which can lead to a host of legal complications
The most obvious concern that might spring to a seller’s mind is theft. What if the potential buyer is up to no good and takes off with the horse without paying? Sellers can protect themselves against dishonest buyers in a couple of ways. First, they can take payment (or at least a large portion of it) up front before the start of the trial period with a written guarantee that the money will be refunded if the potential buyer decides not to go through with the sale. Obviously, if the buyer then makes off with the horse, the seller has money in hand. Secondly, a seller should retain the registration papers until the sale is complete. This is especially important in consignment sales so that the owner retains proof of ownership in the event a dishonest consignee attempts to keep the money for himself after sale.
Another common problem that occurs during a trial period is injury to potential buyer or someone whom the potential buyer allows to ride the horse. During the trial period the seller is still the owner of the horse, and ownership often equals liability. If someone gets injured while the horse is in someone else’s possession, the owner/seller could be looking at a potential lawsuit. The best way that potential sellers can protect themselves in this instance is through a trial period contract liability release. That is a written document that covers the trial period and sets out with specificity that the owner is not liable to the potential buyer (or consignee) for injury occurring during the trial period. This release should also include an indemnification clause, which means that the horse owner will not be held responsible for injury to third parties during the trial period. This, again, is especially important for consignment sales since any potential buyer who rides the horse in the consignee’s possession is a third party who could have a claim against the owner if injured. A liability release is not foolproof and the owner may still be liable in certain instances (for example, if he knew that his horse had dangerous propensities, or the potential buyer was not experienced enough to handle the horse). This is why it is important for any owner/seller to maintain proper insurance coverage. From the buyer’s point of view, it is also important to have proper insurance coverage before entering into a trial period, especially if a liability release is being signed.
It is also important to consider what will happen if the horse is injured or becomes lame or sick during the trial period. In many instances, if the injury or illness is caused by the negligent or reckless actions of the potential buyer, the potential buyer may ultimately be responsible. However, if the illness or injury is a result of natural causes, the owner may have to absorb the loss. That is why it is important for both seller and buyer to have medical and mortality insurance in place.
While trial periods may be a great way to make sure both seller and buyer are happy, the situation can be fraught with problems if entered into blindly. It may be inconvenient to have a pre-sales contract covering the trial period but it is a good way to spell out each party’s responsibilities and avoid potential concerns and costly litigation.
Mati Jarve is the managing partner of the Marlton, New Jersey law firm of Jarve Kaplan Granato, LLC. He is certified by the New Jersey Supreme Court as a Civil Trial Attorney and theNational Board of Trial Attorneys as a Trial Advocate. Licensed in New Jersey, Pennsylvania and Arizona, he maintains a national practice in civil litigation, including equine related issues. This article is for informational purposes only and is not intended to be legal advice. If you have a specific legal question or problem you should consult with an experienced and knowledgeable equine law attorney. Questions, comments or suggestions can be e-mailed to firstname.lastname@example.org, by visiting www.nj-triallawyers.com.