In a previous article, we considered live horse auctions and some of the legal issues that might be encountered. In recent years, however, online horse auctions have grown increasingly more popular.

Although I touched briefly on the subject in my last article, given the particular legal complications that can arise with online auctions, they certainly merit a closer look.

The concept of online auctions was a natural offshoot of the internet shopping craze and was fueled by the desire to find a more cost-effective way to buy and sell horses. What began as an experiment by a few equine auction houses quickly gained popularity as a viable alternative to live auctions. Sellers could “show” their horses from the comfort of their own homes, and buyers could peruse the offerings without ever leaving their living room.

Online auctions use a variety of videos and photos to showcase their catalogues, posting performance records and other relevant documentation for potential buyers to see. The auction proceeds in a virtual environment, and sellers are able to reach a huge number of potential buyers—many more than they would during a traditional live auction.

Still, as we saw previously, auctions, by their nature, can attract certain unscrupulous sellers waiting to take advantage of unwary buyers. With online auctions, that potential increases, due in large part to the degree of anonymity and flexibility provided by the internet.

Here are some of the particular legal pitfalls to consider with regard to online auctions. It’s by no means a comprehensive list, but provides a general overview of several of the more common issues.

Misrepresentation of the Horse

In live auctions, when a buyer has the chance to assess a horse in person, instinct and observation play a huge role in raising red flags with regard to possible issues. Online auctions deprive buyers of that personal contact, and some less-than-honest sellers may take advantage of that fact to gloss over problems or make claims that are not quite accurate.

Since online auctions are conducted using only photographs and video, there is a greater potential for a seller to misrepresent the horse. After all, even a horse that has some serious behavioral or other issues can be made to look good for a relatively short video clip. Furthermore, photographs can be doctored to mask any obvious problems. The buyer may, of course, have recourse against the seller for intentional misrepresentations, but many of these online auctions are “as is” sales, with no implied warranties, and the principal of “caveat emptor”— let the buyer beware—applies.

Another type of misrepresentation involves “bait and switch.” Many times, online auctions require payment in full before a buyer can pick up the horse he or she has won in a bid. It is certainly not unheard of for unscrupulous sellers to substituting another, similar-looking but less desirable horse for the horse offered at auction. In this instance, the seller has the advantage because he already has the buyer’s money, and the burden is on the buyer to prove that the seller gave him a different horse. Sometimes, depending upon the thoroughness of the paper trail, this may not be an easy task.

Seller Identity

If a reputable live auction house has had a problem with a dishonest seller, they will likely not allow that seller at their auctions. However, when it comes to online auctions, it is easier for a seller to mask his identity. Sellers are typically not dealing face-to-face with the auction house, so they can create pseudo-identities and alternate profiles to hide the fact that they have had problems in the past. Because of this, it is harder for online auction houses to police their auctions and keep the bad element out. As a result, many online auctions significantly curtail their potential liability and possible exposure by making buyers sign pre-sale agreements that will keep the auction house off the hook in the event a buyer gets duped. There have been instances where a dishonest seller (and his fake profile) simply “disappear,” leaving a buyer with little to no recourse in the event of fraud or misrepresentation.

Failure to Read the Agreement

As mentioned, prior to partaking in an online auction, the online auction house typically requires buyers to sign and submit a detailed agreement setting forth the terms of the auction and the rights, responsibilities and obligations of the parties involved. Many potential buyers, in an excited hurry to find the horse of their dreams, glance over this agreement, but don’t read very carefully. This is a huge mistake as these agreements are generally enforceable and contain crucial information.

For instance, as I mentioned in the previous bullet-point, most of these agreements eliminate any liability on the part of the auction house for a sale gone bad. Further, they often indicate quite clearly that there are no implied warranties of merchantability or fitness for a particular purpose.

Basically, that means that there are no guarantees that a horse will meet the buyer’s expectations or that the horse will be fit for the purpose for which it is purchased. This has significant legal implications for a buyer should something go wrong.

In addition, many of these agreements provide that the buyer only has the right to a veterinary examination of the horse after the sale and, even then, the scope of the exam could be quite limited. This is especially significant if the buyer must pay in full before the exam. Even if the veterinarian finds something wrong, a buyer may find it difficult to recoup his or her money in full, depending upon the scope of the exam and what it disclosed.

These agreements also cover important details such as who is responsible for the cost of transportation and any paperwork needed. If a buyer who lives in Maine bids on a horse in California, if he has not read the agreement carefully, he may be surprised to learn that he is responsible for the cost of transportation and for securing the health certificates needed for transportation.

I could give you pages of other examples, but suffice it to say that it is critical to read any pre-auction agreements carefully and to make sure you understand terms along with your rights and responsibilities. Otherwise, you could find yourself on the losing end of a legal battle for rights that you gave away.

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 the National 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.