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Is it Fraud? What Needs to Be Disclosed in a Horse Sale.

One of the most common issues seen by equine lawyers is fraud or concealment in horse sales. Whether you are a buyer, a seller, an agent, or a trainer it is important to understand and appreciate the duty of disclosure in a horse sale.

There is a common misconception that if a sales contract contains the words “as is" the buyer cannot later sue the seller for failing to disclose known problems with the horse. In California, however, the owner of a horse has a duty not only to tell the truth about the animal they are selling but to also disclose “important facts" to a prospective buyer. “Important facts" can include facts regarding the horse’s, health, soundness and disposition. Under California law, liability for fraud arises when a seller: (1) misleads a buyer, or (2) fails to disclose an important fact that could not have been discovered by the buyer, or (3) actively conceals an important fact.

When trainers and sales agents get involved, the potential for trouble grows because an agent has a special relationship known as a “fiduciary relationship" with their client. A fiduciary relationship exists when one person has a special obligation to protect the interests of another person. A sales agent has a duty to protect the interests of their client and in many cases a trainer has a special duty to protect their client who is relying on their experience and expertise. If a trainer or agent is taking a commission from both the buyer and the seller they have a dual loyalty to both sides, creating a potential conflict of interest. (California law was recently changed to require that dual agency relationships in horse sales be disclosed in writing.) Although it may be tempting to collect a commission from both the buyer and the seller, the increased liability that comes from representing both sides may not be worth it.

In many horse sales a buyer and seller may never even meet each other but this layer of separation does not protect a seller from liability. If you are a seller, it is important to not only tell your agent all the known problems with a horse, but to make sure that the agent provides this information to the prospective buyer. The only way for a seller to truly protect themselves from an overenthusiastic agent is to put the disclosures in writing and make sure the buyer acknowledges, in writing, that they have read the disclosure. A judge or jury will decide on a case by case basis what facts are considered “important" so for a seller it is prudent to err on the side of over-disclosure if you are not sure what to disclose. Do not let an over-enthusiastic trainer or sales agent discourage you from protecting yourself. All too often a well meaning seller will authorize the release of veterinary records but the records somehow never make it into the hands of the buyer.

From a buyer’s perspective it is also important to document, in writing, what you have or have not been told about a horse. Just because you are buying a horse “as is" without a warranty does not mean you are waiving your right to ask questions and get truthful and complete answers. Ask for the names of each veterinarian or veterinary hospital that has been known to treat the horse - even for vaccinations and maintenance injections and request all records from these medical providers, not just x-rays or earlier pre-purchase examinations. If a horse has been insured, do not be afraid to ask for records of previous insurance claims relating to the horse.

Although many horse sales seem to be conducted the same way they were back in the days of the wild west, California law has advanced and imposes obligations on buyers, sellers and agents. Buyers are better off asking too many questions than not enough. Do not be afraid to ask for medical and insurance records. Look at the horse’s show record and get explanations for long gaps between shows. If possible, see if you can find photos online of the horse at the show and make sure the horse in the photo is the one you are actually buying. Try to determine why a horse from one area of the country is being sold somewhere else. Did the horse have a bad reputation in its home state or zone? Despite even the most thorough investigation, a buyer cannot always protect themselves from an unscrupulous seller and that is why it is best to document what you have and have not been told.

Whether you are a buyer, a seller or an agent, the advice you learned as a child still holds true: “Honesty is the best policy" and is the best way to avoid a lawsuit.

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