LEGAL ASPECTS OF HORSE MANAGEMENT
LESSON
FOUR: CONTRACTS
Introduction
The horse world is made up of
contracts--from buying horses, taking lessons, training to buying supplies, few
transactions do not involve a contract. Unfortunately,
too many forget or do not understand the legal ramifications of their
acts. They proceed
cavalierly making agreements with few formalities, no writing and sometimes not
even a handshake.
Treating transactions and contracts
with such casualness invariably leads to a dispute in court.
If a contract is treated with the
legal importance it deserves, and is written, fully detailed and encompassing
the parties’ agreement, it will significantly reduce the likelihood that a
dispute will result in a court proceeding.
This lesson covers the necessary elements of a contract. Many of the concepts addressed in this Lesson
will be discussed in more detail in the following section on “Sales.” This Lesson deals with general principles
applicable to all contracts—not just sales.
Elements
of a Contract
A contract involves: An agreement
(either oral or written) involving 2 or more persons, an exchange between the
persons (offer, acceptance, consideration) involving one or more promises that
is enforceable.
The absence of any of the above
elements is fatal to a valid, enforceable contract.
Note how in the above elements there
is no specific requirement of “writing”.
Although certain contracts are required to be in writing, such as real
estate contracts and those falling within the statute of frauds (discussed more
fully in Lesson 5 Sales), there is no general requirement that an agreement be
written in a formal “contract” in order to be enforceable. This is important to recognize, as often the
collective words and actions of two or more individuals result in a legal
contract with all the resulting legal implications.
Offer/Acceptance
An agreement necessarily involves an
offer and acceptance. In that connection
there must be mutual assent; each party must intend to agree to the contract
terms. For instance, Sally wants to sell
her horse for $1,500.00 and offers the horse to Tim. Tim wants to buy Sally’s horse, and agrees to
buy the horse for $1,500.00. Tim pays
Sally $1,500.00 and picks up the horse.
This example shows a simple offer and
acceptance; however, the scenarios are not always so clear.
For example, it is important to note
that a mere preliminary proposal is not an “offer”. A true “offer” results in a complete contract
once accepted; a preliminary invitation reserves the right to a final statement
on whether a contract will exist—a contract will not immediately result from
acceptance of a preliminary proposal.
Sally tells Tim “I’m thinking of selling
my horse for $1,500.00. Tim tells Sally
“I’ll buy your horse for $1,500.00.” In
this case there is no contract—yet.
Tim’s statement did not constitute an acceptance; rather, Sally was
making a mere preliminary proposal and a contract would only result if, after
hearing Tim’s acceptance, she agreed to sell the horse for $1,500.00.
It is important to note that an offer
does not last forever. In that
connection, the course of dealing between the parties, as well as custom, would
be important in determining when the offer expires.
If there is an offer and the offer
meets with a counter-offer, such counter-offer acts as a rejection of the
original offer, and a substitution of a new offer. If the person making the original offer
accepts the counter-offer, a valid contract will result at that time.
Thus, Melissa offered Henry her saddle
for $500.00. Henry replied “I’ll buy it
for $450.00.” There would not be an
offer and acceptance in this case since Henry’s counter-offer acted to
terminate the original offer and resulted in an offer by him to buy the saddle
for a lesser price. Henry’s
counter-offer would need to be accepted by Melissa in order for a contract to
exist.
The power to revoke an offer is with
the person making the offer prior to acceptance. If the person making the offer contracts with
another prior to attempted acceptance by the first subject, the offer will be
revoked.
Ted offers to sell his trailer to John
for $2,500.00. John goes home and mulls
over the offer and decides that he wants to buy it. However, prior to receiving John’s call Ted
sells his trailer to Melissa. In this
case there has been no breach of contract because the original offer from Ted
to John was never accepted—John would have had to communicate his intent to
accept prior to Melissa’s purchase. Thus
Ted was free to revoke his offer and sell to Melissa.
Pat tells Kate that she is selling her
horse for $1,000.00. Kate goes home and
decides she wants the horse. However,
prior to calling Pat she picks up her voicemail and hears a message from Pat
stating: "I’ve changed my mind, and
will be selling my horse for $2,000.00.”
This statement acted to revoke the original offer—which had not yet been
accepted—and substituted a new offer which could either be
accepted or rejected by Kate.
Connected with the concept of an
“offer” is the “acceptance.” An
acceptance is critical to contract formation.
There is a general rule that the acceptance must conform to the offer.
What is the effect of an acceptance that
does not conform? In such a case the
reasonable interpretation of the acceptance response must be considered.
For example, Mary offers to sell her
horse to Stan for $10,000.00. Stan
states that he will buy her horse, provided the price is reduced to
$9,000.00. This would act as a
counter-offer and a termination of the original offer.
But what if Stan states that he is
interested in buying the horse, just not at that price? This would not be a counter-offer since no
price was stated. Stan’s response would
be a rejection of the offer with an explanation seeking to encourage a new
offer.
The person receiving the offer may
also seek elaboration in his/her acceptance.
For instance, the person may reply that he/she is interested in buying, but
needs to know particular information. If
the information is provided the acceptance would be valid.
Of course it is also necessary that an
acceptance be communicated to the person making the offer. If the offer contained certain details that
must be followed concerning the acceptance, these would need to be followed.
For example, Steve offers to sell his
horse to Jeff for $4,000.00 provided that Jeff e-mails Steve by 6:00 p.m. if
interested. Jeff calls Steve and leaves
a message on his answering machine at 5:00 p.m. that he wants to buy the
horse. In this case the acceptance was
not made since it did not conform to the mandatory requirements imposed by
Steve.
But what if Steve offered to sell his
horse for $4,000.00 to Jeff, and stated “why don’t you try and let me know by
e-mail.” In this case the offer did not
make e-mail the exclusive means of acceptance so that a contract would result.
In addition to the method of
acceptance, the time of acceptance should be determined. In many cases it is obvious when acceptance
occurs, such as when there is an immediate acceptance of an offer. However, not all cases are quite so clear,
such as where there is a time delay between acceptance and the original offer.
Where there is an instantaneous communication
of acceptance the manifestation of it acts as an immediate acceptance. What if, however, the parties are
communicating by fax and the fax does not go through. In such a case the party who is aware of the
problem must notify the other or else they will be bound by the
communication.
With respect to non-instant
communications, unless required otherwise, an acceptance is binding as soon as
it is out of the possession of the person receiving the offer. This is also known as the “mailbox rule.” Once an acceptance has left the possession of
the person replying to the offer, the acceptance is effective—not when it
reaches the person making the offer.
Sara agrees to sell her saddle to Stan
provided that Stan notifies her of his intent to do so by Friday. Stan sends his acceptance of her offer on
Thursday. Sara receives the acceptance
the following Monday. In this case, the
acceptance was effective—and the contract valid—on Thursday even though it was
not received by Sara at that time.
Unlike the case with an acceptance, a
counter-offer, or rejection of an offer, does not become effective when
received by the person making the original offer.
Options
and Firm Offers
An offer is always revocable prior to
acceptance, unless it is an option or firm offer. An “option” is a promise by the person making
the offer to keep the offer open for a period of time.
Terry offers to sell his horse to Dave
and agrees to hold it open for a period of one month.
However, the above example does not
result in a valid option because an option must be supported by consideration,
separate and apart from the contract the option involves. (Note:
the concept of “consideration” will be more fully explored in the
following section).
Compare the following examples, Terry
offers to sell his horse to Dave for a period of one month at the price of
$10,000.00. Dave pays Terry $100.00 for
the right to purchase the horse at that price for the next month. This would constitute a binding offer and
Terry would be precluded from revoking the offer for one month.
Note: the above rule requiring
separate consideration only applies where the option is a separate contract; if
there is an option granted as part of an existing agreement, the consideration
that supports the agreement is sufficient to also support the option.
For example, Jerry agrees to purchase
Tim’s horse for $5,000.00. As part of
this agreement, Jerry receives an option to breed the horse to Tim’s stallion
for a period of 6 months. This option
does not need separate consideration since it is part of the contract to buy
the horse and is supported by the $5,000.00 consideration.
An exception to the rule requiring
consideration for an option is where the person making the offer deliberately
makes a promise to induce action, and the person receiving the offer undertakes
some action that is detrimental. This is
known as “promissory estoppel.”
Consideration
“Consideration” is an essential
element to a contract—a mere gratuitous promise is not a contract, and is not
enforceable. In most cases, it is
obvious whether or not there is a contract.
Compare
the following two scenarios:
Tom offers the local horse rescue league a
donation of hay.
Tom owns a horse farm and agrees to sell a horse to one of his students for
$10,000.00.
The first scenario had no
consideration; it was a purely donative arrangement that was not a
contract. The second was a commercial
transaction where Tom received, and the student gave-up, the sum of $10,000.00.
The essence of consideration is a
bargained-for exchange whereby the person receiving the offer gives up
something (suffers a detriment) in exchange for the promise of the person
making the offer.
However, despite the need for
consideration, a contract will not be invalid simply because the consideration
is inadequate.
For example, Nancy sold her sound,
aged, field hunter to Tina for $400.00.
The actual value of the horse was well over $5,000.00. Although
the wisdom in Nancy selling her horse for $400.00 was questionable, it would
not be open for attack by a court of law.
Tim is a riding instructor that offers
training/board for a price of $100.00.
The going rate in his area is $500.00+ per month. Tim’s poor business judgment will not
invalidate his training contracts.
However, there cannot be consideration
where there is a preexisting duty. For
example, John is obligated by contract to sell his horse to Jim. Susan, a friend of Jim, is anxious to see the
sale go through, and tells John that if he sells his horse to Jim on the date
promised, that she will give him her old saddle. John sells his horse to Jim, as promised, and
seeks to recover Susan’s saddle. Susan,
however, has changed her mind, and refuses to give it up. Can John sue for breach of the contract? No, since John was already obligated under
the contract to sell his horse to Jim, and a
preexisting duty cannot constitute the consideration for a contract.
Closely related to consideration is the
concept of “mutuality.” This concept is
based upon the idea that both parties must be bound—not merely one. A simple example: Tom agrees to sell his
trailer to Jane for $1,000.00. Jane
agrees to buy the trailer unless she changes her mind. This would not be a valid contract since it
is not mutual; the freedom to change her mind makes Jane’s promise illusory.
However not all conditions on
contracts make the contract illusory or non-mutual. For example, Frank agrees to give his saddle
to Jack for free unless Jack wins the lottery with the ticket he has purchased,
in which case he would pay $50.00 for the saddle. Frank is absolutely committed to Jack, but
Jack is only obligated to pay in the event of winning the lottery. This condition does not make the contract
illusory because it is tied to an event that could happen.
Another type of contract frequently
encountered with broodmares and stallions is a provision in a contract of sale
where the seller retains a breeding right and/or foal(s).
For instance, Marcia agrees to sell to
Stan her broodmare for $5,000.00 plus a retained right to breed the horse and
keep the foal.
Such a transaction is inviting a
lawsuit if it is not structured and specific.
For instance, if the above example had no written contract, or, no
greater details, the following would be up to dispute: what happens if the mare
is not bred? What is the time frame for
breeding? Who cares for the mare while
pregnant? What kind of notice must be
given to the purchaser of the intent to breed?
What if the mare becomes infertile?
If the purchaser wants to “buy out” the seller’s retained interest, what
is it worth?
As can be seen, any conditional sales
contract that retains any form of breeding interest should be drafted in detail
to avoid the all-but-inevitable dispute that will result.
Promissory
Estoppel
“Promissory estoppel” is an equitable
concept by which consideration is forgiven in a contract—the absence of
consideration will not invalidate the contract where the circumstances indicate
the need for promissory estoppel. In
cases where there is no consideration, there may nonetheless be a valid
contract where the circumstances are such that equity holds the one making the
promise accountable for his or her promise.
The elements of promissory estoppel
are: a promise where the one making the promise reasonably expects it to induce
reliance by the one receiving the promise.
The one receiving the promise is induced to act (detrimental reliance);
and injustice can only be avoided by enforcing the contract.
For example, Bob’s Uncle John tells
Bob that he will pay for weekly riding lessons if Bob buys a horse.
A
court could conclude that Uncle John’s promise was a mere gift and
unenforceable. However, even if it was
to find no consideration, Uncle John’s promise could be binding under estoppel
grounds. Bob relied upon Uncle John’s
promise and was induced to buy a horse, as he was ultimately desirous of riding
lessons.
What if Uncle John made the same
statement, but Bob purchased a horse because he fell in love with a horse he
had seen earlier at a farm. If that was
the case, there would be no detrimental reliance and no contract claim.
Performance/Breach
Once there is an agreement that is supported
by consideration, its terms must be followed; failing to perform as required by
a contract will result in a breach and subject the breaching party to a lawsuit
for breach of contract.
In many cases it is clear whether
there has been performance. For example,
Pam enters a written agreement to sell her horse to Rita for $1,000.00. Pam delivers the horse to Rita. Rita takes the horse and gives Pam $1,000.00.
In the above example there is
performance of the contract and no breach.
What if Pam went to deliver the horse, but Rita refused to accept the
horse and pay the $1,000? In this case
there would be a breach, and Pam could sue Rita for breach of contract. (Note:
Had this been an oral contract it would have been subject to the statute
of frauds and possibly unenforceable. A
detailed discussion of the statute of frauds in sales cases is included in
Lesson 5).
Contract
Interpretation/Parole Evidence
The terms of the contract ultimately
control the parties’ performance.
However, to the extent the contract is itself ambiguous, other means may
be considered to decipher the contract terms.
The course of performance between the parties, the course of dealing,
and trade or custom in the industry may be considered. (The application of course or performance,
course of dealing and custom will be covered in detail in Lesson 5).
For example, Polly enters an agreement
with Autumn Farm to board her horse on “full-board” for $400.00 per month. The contract does not define “full
board.” Polly arrives at the barn one
day to find her horse in a stall caked with mud. Polly confronts the barn manager with the
news, and is told that “full board” does not include grooming. Polly’s horse acquires rain rot as a result
of the lack of grooming. Polly sues for
breach of contract.
In the example, a court would not have
a clearly defined contract term and would have to ascertain the meaning of
“full board.” Absent a course of
performance or course of dealing between Polly and the farm, the court would
consider trade and usage in the industry; it would look to what other boarding
farms in the local area included under the term “full-board.”
Parties to a contract are wise to
define terms as needed, and make the contract as clear and complete as possible. Failing to do so makes a contract that is
much more susceptible to a lawsuit and judicial interpretation.
Despite the fact that contract
interpretation frequently considers the parties’ performance, dealing and
custom, this is limited by a legal doctrine known as the “parole evidence
rule.” This rule states that with
respect to a writing that is intended as a final expression of the agreement,
parole evidence may not be used to contradict, explain or supplement it.
The parole evidence rule only prevents
the admission of evidence relating to the time prior to the signing of the
contract. Thus, if a person enters an
agreement, the terms may not be contradicted, explained, or supplemented by
negotiations that occurred prior to the signing.
For example, Meadow Farm entered an
agreement with Karl to board his horse for $200 per month. Karl was entitled to “field board.” One day it rained, and Karl sought to
temporarily place his horse in a stall.
The manager indicated that he could not do so since he was on field
board and not entitled to a stall. Karl
seeks to sue for breach of contract alleging that prior to signing the boarding
agreement the owner of the farm had told him that he was entitled to use the
stall in the event of bad weather. An
argument would likely be made that this evidence was barred by the parole
evidence rule since it arose prior to the signing of the agreement, and it is
therefore assumed that the written document really reflects the agreement’s
terms.
Parole evidence is admissible under
certain circumstances such as: to aid in interpreting existing terms; to
establish fraud or duress; to prove that consideration was not paid; and to
establish an oral modification of the agreement.
Contract
Avoidance—When is Performance Excused?
In some cases, despite the presence of
a valid contract, the court will use its power to refuse its enforcement. In the case where a contract is
unconscionable, where the contracting party is a minor or insane, where there is
fraud or misrepresentation, where a contract is illegal or contrary to public
policy, or, in the case of mistake.
A legal mistake sufficient to void a
contract is narrowly drawn: it involves an error of fact concerning a thing or
event that existed at the time of contracting.
It does not include an error of judgment.
For example, Jane entered a contract
with Karen to purchase Karen’s saddle for $500.00. Jane decided after making the agreement that
she really shouldn’t buy a saddle, and that the money was better spent on
hay. However, Jane cannot void this
contract for making a mistake in judgment.
Compare, Greg agrees to buy Ted’s
trailer for $1,000. Both Greg and Ted
believe at the time of contracting that the trailer was suitable for towing an
1800 lb. horse. Greg has a 1900 lb draft
horse. The trailer is actually capable
of towing animals up to 1200 lb. The mutual mistake of the parties would void
the contract as the towing capacity of the trailer went to the essence of their
bargain.
However, in the above example, if Greg
owned a miniature horse weighing 500 lb the mistake would not void the contract
since it did not go to the essence of the contract.
Substantial
Performance/Partial Breach
Although any performance that fails to
meet the promises made will result in a breach, there are different levels of
breach with different results. A breach
may be material and total, material, but not total, and not material and
substantially performed.
In the case of a total and material
breach the one to whom the promise is made may: withhold performance to the
extent a performance remains to be performed; terminate the contract; and claim
damages for the breach. In the event is
not total but material, the one to whom the promise is made may suspend
performance; await a cure by the one making the promise; and seek compensation
for the losses caused by the breach. In
the case that the breach is neither total nor material, and the one making the
promise has substantially performed, the sole remedy is seeking damages for the
loss suffered—there is no right to suspend or terminate performance.
For example, Tina enters an agreement
to purchase a registered TB broodmare, with papers, from Kent Farms. Tina pays a $1,000.00 deposit at the time of
signing the contract of sale, with the remaining $9,000.00 to be paid at the
time the mare is delivered. At the time
the mare is delivered there are no registration papers as required by the
contract. This would be a material
breach, but not total, and Tina could either suspend
her performance (payment of the remainder), await the papers, and recover for
the losses suffered as a result of the breach.
But what if the horse was to be
delivered with a leather halter with a name plate, but arrived wearing an old,
dirty, nylon halter? In this case the
breach would not be total or material and Tina could recover for the loss
suffered by reason of the substitute halter.
Anticipatory
Repudiation
Anticipatory repudiation of a contract
differs from a breach in that it occurs prior to the due date of performance;
it involves the person making the promise indicating that performance will not
be forthcoming when due.
If a person clearly indicates that he
or she will repudiate the contract, the act is deemed a total and material
breach. In the event that a repudiation
occurs, the one to whom the promise was made has two options: either treat it
as an immediate breach, thereby terminating his/her own performance and suing
for damages; or, waiting until the actual performance date to see if the first
party changes his/her mind.
For example, Patty enters an agreement
to purchase Tim’s horse for $10,000, to be delivered in a week. Patty gives Tim a deposit at the time of signing
the contract and is to pay the remainder upon delivery. Patty, prior to receiving the horse, tells
Tim that she has changed her mind and cannot buy the horse.
This example would be an anticipatory
repudiation and enable Tim to sue immediately for breach of contract. Alternatively Tim could wait for performance
and sue in the event that Patty does not buy his horse.
Remedies/Damages
In the event the plaintiff establishes
a breach of contract he/she may sue for the resulting damages. An award of damages would be the usual form
of recovery, rather than specific performance (an order requiring the breaching
party to comply with the contract).
Damages may be compensatory,
declarative, punitive, or nominal.
Parties may also agree by contract to limit the damages to a particular
amount—known as liquidated damages.
Compensatory damages seek to put the
plaintiff in the position he/she would have been had the contract been
performed. Only damages that are
reasonably certain are recoverable, and the plaintiff is obliged to mitigate
damages to the extent possible.
For example, Mike entered an agreement
to train 3 yearlings at Wayside Farm.
Mike was to be compensated $400.00 per horse for one month. An additional riding opportunity came along, and
Mike opted to not show up at the farm as promised. The Farm paid another trainer to train the
horses (for $2,000) sued for breach of contract and sought damages. Its recovery would be $800--the difference in
value between what it would have paid Mike ($1200.00) and what it ended up
paying a trainer to train the horses ($2,000.00).
Compensatory damages can be
direct—such as the example, or, consequential.
Consequential damages include all the costs incurred as a consequence of
the breach. Thus in a horse sales
contract, where the buyer breaches, consequential damages might include the
advertising or agent fees incurred in finding another buyer.
Damages are the preferred remedy in a
breach of contract claim. However, if
the equities of a situation require it, specific performance may be had. A court may specifically order the one making
the promise to perform the contract.
Breeding
Contracts
Breeding contracts detail the terms
and conditions of the breeding services provided by the stallion owner to the
mare owner. While not required to be in
writing, they typically are.
As with any agreement, a breeding
contract should strive to be complete and clear. All ambiguities should be removed with
respect to the duties of the owners.
Particularly attention should be paid
to the type of care that the mare is to receive. One farm's idea of “full care board” may not
be the same as another’s, and all ambiguities in this area should be removed.
The breeding contract typically comes
with a type of warranty known as a “live foal guarantee.” This warranty typically states that unless
the foal is born live and stands and nurses unassisted the mare owner is
entitled to rebreed to the stallion the following year. The mare owner in this contract is assured
that he or she will not pay a stud fee for no
foal. Note only the stud fee is
guaranteed, not incidental expenses such as board or vet bills.
Thus, if a foal stands, nurses, and shortly
thereafter dies, it would be deemed born live for contracting purposes and the
mare owner would be not entitled to a re-breeding. Due to the harsh consequences of a foal that
in essence dies as soon as it nurses, many contracts provide that a “live foal”
is one that lives a prescribed period of time—e.g. 12 or 24 hours.
A breeding agreement should also
detail the terms and conditions of the re-breeding, if one becomes
necessary. For instance, the agreement
may state that the re-breeding occur in the same
breeding season, or, the mare returned the following year. Setting a specific time in the agreement
rather than a vague term such as “re-breeding the following year” reduces the
risk of a dispute that may lead to litigation.
Live foal guarantees typically give
the same mare the right to return for breeding in the event of a dead
foal. However, the contract may provide
for a substitute mare in the event of death or other condition of the
mare—again, the terms of the contract will control. If the stallion dies or becomes unfit for
breeding the contract may state that another stallion can be substituted or
that the stud fee will be returned—the terms of the contract will control.
The number of return attempts may also
be stated in the agreement. Thus, an
agreement may state that only one re-breeding is permitted. The agreement may also require a vet exam
prior to re-breeding, and may be disallowed if the mare is bred to another
stallion; as with other contract terms, the parties are free to agree to the
specifics.
Clarity and completeness should be
stressed in a breeding agreement. Terms
and conditions should not be general, and should be defined. Mare owners need to be aware of the limitations
and conditions of the guarantee.
Boarding
Agreements
An agreement whereby one person agrees
to board or keep another’s horse gives rise to a bailment situation in the eyes
of the law. As stated in Lesson 2 a
bailor is the owner of the horse and the bailee is the person that agrees to
keep and/or care the horse for the owner.
While not required, a horse boarding agreement should be in writing and
should fully address the rights and obligations of the parties.
A well-drafted boarding agreement
should include all duties of the bailee and the bailor and should leave no
terms open. An incomplete or ambiguous
agreement—or none at all—invites a disgruntled bailee or bailor to resort to
the courts for relief.
There are several provisions typically
included in a boarding agreement. First of all most agreements will contain a
release. (Releases were discussed
generally in Lesson 2). Certainly from a
bailee’s viewpoint this is a good idea in order to limit or relieve liability. However, as with any release, it must be
properly drafted or risk being worth little.
Emergencies
A boarding agreement should also
specifically outline the responsibilities of both the bailee and bailor in the
event of an emergency. While the
agreement should obligate the bailee to notify the bailor in the event of an
emergency with the horse, and should state the method to be used by the bailee
to do so (eg. phone numbers, e-mail etc.), it should also include a clause
granting the bailee complete authorization to contact a vet and insurance
company. The authorization should also
grant the bailee the right to make a medical decision in the event that the
bailor cannot be reached. Compare the
two following scenarios:
Susan boards her horse Apollo at
Seacrest Stables. At the time she
brought her horse to the farm she signed a boarding agreement that gave the
farm the ability to contact a vet and insurance company in the event that she
could not be reached. A groom at the
farm finds Susan’s horse out in a field in obvious distress. The farm attempts to contact Susan at the
numbers provided in the agreement, but is unable to do so after trying the
necessary number of times. The farm then
contacts its vet to arrange care for the horse, and contacts Susan’s insurance
company and notifies it of the emergency.
Susan boards her horse at Seacrest
Stables. There is a boarding agreement
that obligates her to pay $300/month for full care board. The agreement sets forth that the farm is to
try and reach Susan in the event of an emergency, but is silent with respect to
what happens in the event that she cannot be reached. A groom finds Susan’s horse colicking in a
field and tries to reach Susan, but she is sailing and cannot be reached. The vet is called, and the vet states that
the horse needs to be put down. Not
having permission to do so the farm continues to try and reach Susan whom is
finally reached later that afternoon.
Susan authorizes euthanasia following the horse’s extended and
unnecessary suffering. When Susan
attempts to recover under her horse mortality policy the claim is rejected
based on the fact that the insurance company was not notified of the emergency,
as required by the policy terms.
A boarding agreement should clearly
outline what is to occur in the event that the owner cannot be reached during an
all-but-inevitable emergency. While a
broad veterinary and insurance authorization granted to the farm will resolve
the issue, some owners prefer to limit the veterinary treatment to a particular
amount, or, name another person who is to be contacted in the event that the
owner cannot be reached. Regardless of
how it is accomplished, a provision discussing how to handle emergencies should
be included.
Extra
fees
By all means the boarding agreement
should detail the amount of board, and what is included for that amount. Details should not be assumed, such as
whether supplements are included on a full board arrangement. Rather, the agreement should specify what is
included, and what are “extra fees”. A farm may also consider a provision whereby
there is an extra fee associated with a horse that requires more than an
average amount of feed and hay, or an adjustment in the event of a significant
cost increase (such as with grain).
Otherwise the farm is responsible for the extra costs.
Barn
Rules
It is a good idea to have a section in
a boarding agreement that states the barn rules—what behavior is, and is not
acceptable at the farm. For example,
rules such as: smoking, trash removal, visitors and guests of boarders, barn
hours, dogs and other animals.
Insurance/health
records
Many boarding facilities require a
boarder to have insurance. Any such
requirement should be clearly stated.
Most farms will also require a boarder to be currently vaccinated. A farm reduces its liability and exposure by
ascertaining that all of its boarders are healthy. Similarly, a provision should include the
farm’s policy on horses with vices, such as cribbing, weaving, kicking
etc. If a farm seeks to avoid such
horses there should be a provision in the agreement stating so.
Late
board/agister’s liens
A boarding agreement should clearly
state when and where the board is to be paid.
To avoid late payments, the agreement should set forth a late fee that
is charged to boarders not paying on the due date.
While many farms will overlook an
occasional late payment, a failure to pay altogether will not go ignored, since
the bailee will still be expending money on feed, etc. The agreement should address the lien of the
farm on the horses and property of the boarder in the event of delinquent
board. State laws typically refer to
such as lien as an “agister’s lien.”
Such a lien enables a farm to notify the bailor that if the amount owed
is not paid a lien will be placed on the horse and the horse sold. If a seller cannot be found for the horse,
euthanization is possible.
Recovery under such a lien should
comply with state laws; attempting to sell a boarder’s horse to pay its bills
would result in a conversion (see discussion in Lesson 3: Torts) if the law is
not followed.
Eviction
The boarding agreement should detail
when and how a boarder may be evicted from the farm. In general, a farm may evict a boarder for
any reason—the agreement is terminable at will.
Discrimination or a contract restriction would be the only limitations
on this termination right.
A boarding agreement should detail how
a bailor will be notified of the bailee’s intent to end the relationship, and
when the horse must be removed. Most agreements
will state that the bailor has two weeks to remove the horse, though by
contract a shorter or longer time frame can be stated. A farm would, however, be wise to require the
immediate removal (within 24 hours) of a horse that: is a health risk (contagious),
or is dangerous to persons and other horses at the farm.
Leases
Horse leases are common in the horse
world—however they also result in frequent disputes because of the relationship
between two potentially adverse people and one horse. In a lease, there is a change in who uses the
horse, but there is no change in title.
Unlike a bailment situation, in a lease the leasing party has the right
to use the property—unlike a bailee who merely cares for the property.
It is inviting a lawsuit to enter a
lease agreement on an oral promise or handshake. A lease should detail all issues concerning
the use and management of the horse.
This should be done, and documented, in advance, to avoid later
disagreement.
Among issues to be stated in the lease
are: What is the purpose of the
lease? For instance, in a broodmare or
stallion lease the nature of the breeding lease should be detailed, including
the amount of breeding attempts and the length of the season. In a show or pleasure lease what restrictions,
if any, are placed on the use of the horse—such as where it may travel, or what
level of riding it will be asked to do.
What is the term of the lease? When/how is it to end? How may a lessor terminate the lease
immediately? How can a lessor be
protected from a lessee terminating immediately?
What is the level of the horse’s
care? Nothing should be left open to
doubt as far as what constitutes “taking care of” the horse.
Who pays for what?
Who is covering insurance?
In the event of a dispute—what state’s
law will apply? Where would
a lawsuit be brought?
The lessee should sign a release.
The amount to be paid for leasing,
including when/how paid, and what will occur in the event that the lessee does
not pay.
In addition to the typical lease
situation, horses are also often offered for a “free lease.” Such transactions are typical with older,
unsound, retired horses, or with a horse whose owner has become sick, too poor or
lost interest. However, just because the
lease is “free” does not mean that a proper written lease agreement is
unnecessary; a free lease can quickly become costly when it ends up in court.
In a “free lease” the agreement should
state that it is a lease, not a gift and give a definite time that it will
end. In addition the care to be given,
the party who will pay (typically the lessee) should be specified. A carefully drafted agreement will avoid the
potential for a “free lease” being legally considered a gift, keeping the
actual owner from getting his/her horse back.
Conclusion
The need for a well-drafted contract
cannot be overstated. Too many in the
horse world enter transactions on a handshake, which invariably leads to a
dispute over the nature of the agreement and its terms. The likelihood of ending up in court facing a
contract claim can be significantly reduced with a contract that clearly states
the rights and obligations of the parties.
While a dispute may nonetheless arise, the clarity of the contract terms
makes it more realistic to negotiate—without court assistance—a resolution.
A contract must nonetheless be legally
valid in order to be worthwhile. Legal
guidance may be necessary to accomplish this.
Great caution should be exercised in using pre-printed forms, or Internet
forms that may or may not be valid in the particular state. Indeed, many forms sold on the Internet, as
valid and legal contracts are not even drafted by attorneys.
A horse person would be wise to treat
agreements with less casualness; valid and well-drafted contracts should be
used as a matter of course in any horse transaction.