Welcome to 2015! It’s a brand new year, brimming with potential. Perhaps you decided to purchase a new horse for the New Year, or perhaps you are still thinking about it. We previously covered a host of practical considerations regarding equine purchases. Still, there are other less common aspects to equine purchases that merit a closer look. Specifically, in this article, we’ll take a look at pre-purchase agreements and installment agreements.

Pre-Purchase Agreements

Some might think that having a pre-purchase agreement is redundant. After all, why have a written agreement to have a written agreement? In the equine industry, though, it is often necessary and useful. Many times, the sale of a horse is contingent upon certain factors that require a trial period where the intended buyer, upon giving a deposit, gets to “try out” the horse for a while. For instance, I recently had a client who wanted a horse to ride in the mountainous and wooded areas of Colorado. The horse she wanted to purchase was a rescue horse and was easily spooked when confronted with unfamiliar situations. The buyer was concerned that the horse would not be trustworthy to ride along the steep mountain trails. She took the horse on a trial basis and the sale was contingent upon the horse being able to be ridden safely as intended. Ultimately, even after extensive work, the horse remained too skittish to ride along the steep wooded trails and the buyer returned him. Looking at this type of situation, it’s easy to see why a pre-purchase agreement was necessary. Suppose the horse (or rider) had been injured during the trial period? Who would be responsible? What if the trainer wanted the horse to be boarded at his facility rather than the buyer’s barn? Was that permitted? Would the full deposit be returned if the horse was deemed “good enough” to ride the trails, but the buyer just didn’t feel safe? The pre-purchase agreement should cover these types of issues, detailing the responsibilities and obligations of each party.

Each pre-purchase agreement is tailored to the particular circumstances of the sale, but should always cover certain basic points. For instance, the length of the pre-purchase trial period should be included. The time frame naturally depends on the purpose of the trial period but in any event should never be left open-ended.

The agreement should also detail which party bears the risk in the event of injury or damage to horse, rider or property. Again, this will vary depending upon the circumstances, but many pre-purchase agreements include a “liability waiver” so that the seller is protected in the event damage occurs to another’s person or property while the horse is in the buyer’s possession. In this regard, expectations as to location of the horse should also be included, i.e., is the horse to remain on the buyer’s premises or is the buyer allowed to board the horse elsewhere.

The terms regarding the return of the deposit should also be included in the agreement. A deposit may be refunded in whole or in part depending upon factors agreed upon, including the health of the horse and the conditions of the sale. For instance, in the Colorado example, the agreement should’ve stated who would determine whether the horse was safe to ride, i.e. the trainer, the buyer, or some other party. Also, suppose the horse had been injured during the training? Would the deposit have been returned in full, or a portion retained to pay for vet or farrier fees? Of course, no one expects these unfortunate events to happen, but the purpose of the pre-purchase agreement is to protect both buyer and seller if they do occur.

Installment Agreements

Let’s face it, a horse is an expensive purchase, and many potential buyers just don’t have a large sum of money to put out all at once. Many anxious sellers are willing to accommodate buyers by offering installment agreements. I am personally not a fan of equine installment agreements because they are fraught with legal difficulties. While installment agreements work well for cars or appliances, a horse is a living creature, and things can change. Horses get sick, injured, and need to be cared for during the course of an installment agreement. There are vet fees, farrier fees, boarding expenses, and so forth. These factors need to be accounted for in an equine installment agreement. Many times, a portion of these costs are built into the monthly installment fee for the buyer. Still, what happens if those fees change? Vet expenses, farrier fees, feed costs, etc. can go up over time. Then there are unexpected expenses that inevitably crop up. An installment agreement needs to consider who is responsible for those extra and unexpected costs—a difficult task considering how hard they are to predict.

The parties to an equine installment agreement also need to consider what rights and responsibilities the buyer has during the terms of the agreement. For instance, can he ride the horse, groom the horse, have the horse trained, etc. If the buyer is given any of these options, the parties need to also consider what happens should injury or damage occur while the horse is in the buyer’s control. Unless these terms are spelled out, responsibility can fall upon either the buyer or the seller, or both, depending upon how title to the horse is determined.

Installment agreement should obviously contain provisions detailing what happens if the buyer skips or stops payments. Reason dictates that the buyer would forfeit amounts already paid. However, if a seller can prove that the buyer’s default cost him additional money (i.e. someone else would have purchased the horse for more money) he may be entitled to pursue additional damages. There are also instances where a seller unwisely allows a prospective buyer to retain possession of a horse during the term of an installment agreement. Some sellers do this to save on the cost of daily boarding and care of the horse. However, should the buyer default, additional complications arise. Should the seller repossess the horse? What if the repossessed horse is ill or lame–would he be entitled to compensation? Instead of repossession, could the seller sue the buyer for the remaining payments? Again, the situation creates a hornet’s nest of legal difficulties and is not a good idea.

Looking at it from the other side of the fence, suppose the seller changes his mind during the terms of an installment contract….then what? Reason dictates that he’d be obligated to reimburse the buyer for amounts already paid. But consider also the situation, where the horse is injured, stolen, or dies during the term of the agreement. Is the seller still obligated to refund the money paid? If so, will the reimbursed money include the incidental costs? Again, these issues need to be considered by the parties before signing an installment agreement; otherwise, both parties can find themselves involved in costly and time consuming litigation.

Although, I personally don’t feel installment agreements are appropriate for most horse purchases, there are other options. One such option is leasing. In our next article we will consider the pros and cons of that alternative.

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 mjarve@nj-triallawyers.com, by visiting www.nj-triallawyers.com.