When it comes to young futurity prospects, the opportunity to “go in” on a horse with your trainer can sometimes present itself.   The idea is promising.  You may be able to purchase the young prospect at a reasonable price and have your trainer put in training hours to bring the horse along in order to sell it later for a profit.   This can be a very lucrative venture for both parties.  However, before simply cutting a check and co-purchasing a horse with your trainer, you should work out all the details and “what ifs.”

What happens if only one party wants to sell the horse?  What if you can’t agree on a sale price?  What happens if the horse is hurt?  Who is paying for the vet bills or other care expenses? What shows are you attending?  What happens if the horse goes on to win thousands of dollars in futurity winnings?  Who keeps the money?  Is it split 50/50 or some other way?  Who is keeping track of all of this?  These questions don’t even scratch the surface of the types of issues that could arise during co-ownership of a horse.

Co-ownership often goes awry when there is a disagreement about what rights and responsibilities each party has.   While you may have a long standing relationship with your trainer and believe that you can “work it out” if a disagreement arises, even the best relationships can quickly sour – especially when it comes to money.  The best practice when entering into co-ownership of a horse is to reduce the agreement to writing.  Putting each party’s rights and responsibilities in writing from the outset can minimize conflict and save headaches down the road.

So what types of things should a written agreement address?

First and foremost, the agreement should have a description of the horse, including name, registered owner(s), date of birth, sex, color and markings, and breed association registration(s).

In addition, you should clearly set forth the identities of the parties.  This may seem basic, but it is important.   For example, you and your spouse think you are purchasing a horse along with your trainer; however, the trainer thinks he or she is purchasing the horse with only one of the spouses.  This misunderstanding can lead to a whole host of issues.  How many parties have the right to make decisions?  What if the couple divorces?  Is the horse marital property?  Will the horse have to be sold?  Clearly identifying the parties can help avoid these issues.

Next, the agreement should address the relationship between you and your trainer.  Are you “partners” or “co-owners” of the horse?  While you may think the terms are interchangeable, they can have varying legal consequences.  Partnerships have a separate set of rules that type of relationship from that of co-ownership and are generally governed by state law.  Take the following example.  Three people enter into a partnership for the purchase of a futurity horse.  Six months later, two of the partners decide they want to sell the horse, but the third refuses.  Generally, any difference as to “ordinary matters” connected to the partnership business may be decided by a majority of partners.  However, no change may be made to the nature of the business partnership without the consent of all partners.   So in the example above, if the two owners sold the horse without the consent of the third, they would be in breach of the partnership agreement.  Therefore, it is important to define the business relationship.

Information on what percentage of the horse each party owns is also important since this can determine who has the “final say” in what happens with the horse.  Generally, a majority owner will get the final say; however, agreements can be drafted in many ways.  Sometimes a co-ownership agreement gives one owner the authority to make certain decisions.  For example, the agreement can give your trainer the right to make certain decisions, such as which training methods to employ or which feed and supplements to give the horse, in light of his or her professional expertise.  Again, this can be defined in any way the parties see fit; however, it is important to determine at the outset how the decisions are being made.  Is it based strictly on the ownership percentage or by some other manner?  This will also be important not only in day-to-day use and care of the horse, but also with respect to decision making in the horse’s show career.  Who will ride the horse at the show?  What shows or classes will the horse be entered in?  What if the trainer has another horse in his or her program that is eligible to compete in the same class?  Will your horse end up with a catch rider or have to sit out?  Will you now have to pay for a catch rider?  Ultimately, it is important to spell out who has what say to avoid any hard feelings or disagreements.  This is particularly important if there are only two owners as it is quite possible that a stalemate could occur.

The agreement should also address who will pay for what expenses.  This includes costs associated with the routine care of the horse, such as veterinary bills, farrier costs and feed, but should also address how your trainer’s labor and training hours are factored into the equation.

Is the horse considered part of the regular training program and charged the regular monthly training rate?  Are some or all the training hours factored in to the trainer’s ownership?

Additionally, all horse owners know that there are many other costs associated with horse ownership outside of day-to-day expenses.  For example, will you be taking out mortality insurance on the horse? If so, who will be responsible for the premiums and who will be a named beneficiary on the policy?  What about show related expenses such as entry fees, banding or braiding, transportation, stall and shaving fees and so on?  What about advertising in InStride Magazine?  Anything related to costs and expenses of horse ownership should be addressed by the co-ownership agreement.

Finally, the agreement should clearly state provisions for selling the horse.  When deciding to purchase a horse with another person or person(s), the ultimate goal is probably to make a profit.  However, each party may have different expectations.  The agreement should include terms about the estimated length of time before an effort is made to sell the horse, how the eventual sale price will be determined, and what happens in the event there is a disagreement between co-owners as to whether to accept a purchase offer.

All co-ownership agreements will be different, but they should all start with a conversation between potential co-owners to figure out as many details as possible before purchasing the horse.  Addressing these issues at the outset will help prevent disagreements and ultimately, possible litigation.

Katherine Jarve is a partner at the Marlton, New Jersey law firm of Jarve Kaplan Granato Starr, LLC. She is licensed in New Jersey and Pennsylvania and maintains a practice in personal injury and civil litigation, including equine related issues. Katherine spent her childhood competing on the national AQHA show circuit. This article is for informational purposes only and is not intended to be legal advice. If you have a specific legal question or problem, consult with an experienced equine law attorney. Questions, comments or suggestions can be e-mailed to kjarve@nj-triallawyers.com.