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Bills of Sale

As Featured in the Equestrian Catalog

Bills of Sale, what are they, why are they important, and what are the effects of them, whether signed or not signed?

Randy Catanese reminded us that the when you go to register a horse, the USEF will ask you for a Bill of Sale, or a document that you identify as a Bill of Sale. Therefore, it is important to have one of the two when you want to register your horse or pony with the USEF.

“A Bill of Sale is also important for tax purposes,” Randy told us. “If you are buying the animal for use for profit, that Bill of Sale is something you want. It identifies who the seller is, who the buyer is, and the price or consideration given for the horse. It is very good evidence if you are ever in an audit as to what you actually paid for the animal, and the terms of the sale. These are things that you might not always think about, but it’s important for that.”

Bills of Sale have typical information within the Bill of Sale. They usually identify the seller, the buyer, the identity of the horse or pony, and the particulars about the horse or pony. For example, the breed, the registration, FEI number, color and markings, the date of birth, and things of that nature.

“The Bill of Sale usually has a provision there where it says you are buying the animal “AS IS with all faults.” Generally, what you see is what you get. What the seller is doing is disclaiming warranties. Under the law there are express warranties and implied warranties. And when you see “as is with all faults,” that is the sellers’ attempt to obtain your consent as a buyer that you are buying the animal with no warranties – AS IS.

“They will also talk about how money is to be transferred and risk of transfer,” Randy continued. “When you buy a horse, many times you do not have possession. You buy it through your agent, you buy it directly, but you don’t have possession. What the seller will often say is that the moment you sign that Bill of Sale, you accept the risk of loss.”

Many times, the buyer will sign the Bill of Sale, and the horse is located in one state and you are going to ship it to another state. So what it will say is that once that Bill of Sale is signed, the moment that animal is loaded into a trailer or van for shipping, any type of damage, injury, or loss in transportation, the buyer will bear as the new owner.

“Many people get insurance for just that reason, but some people might be new to the business and really don’t understand what is happening. So this is something to look at when reading the Bill of Sale.”

Since the Bill of Sale is a legal contract, the Law of Contracts will apply. That means that if there is an ambiguity or uncertainty in that document, if the court gets called in to try to figure out how to enforce the Bill of Sale, the party that created the uncertainty or ambiguity will be the one the court will find against.

Some states such as Florida, requires that if there are any representations being made, they must be disclosed in the Bill of Sale.

“If a seller makes representations to a buyer, such as the horse did well in Europe, this horse is healthy, this horse competed at the highest level in Florida last week, any of those representations have to be identified in the Bill of Sale. If they are not, under Florida law, you as the buyer would have remedies, one being that you could get out of the contract.”

As a buyer, Randy said you need to get as much information about the horse you are buying as you can. Age is an important component of that, for a number of reasons. If it is a breeding animal you need to know if the mare can keep breeding. Same goes for the stallion. If it is a performance horse, is it significantly over its prime time for the intended use. Some Bills of Sale never put in the age of the horse.

“That is usually by design, because the horse is 17 years old, but the seller is telling the buyer that it is only a 10-year-old. Later when the lawsuit comes, the seller tells the buyer, “Well, you did a prepurchase exam, and if your vet had looked at the teeth, they would have known that it wasn’t 10 years old. It was obviously 17.” That is important, because I often hear people say, “If I knew the actual age of the horse, I never would have bought it.” So get the specific age of the horse. Try to get the date of birth if you can.”

A complete description of the horse is also quite important. Randy says sometimes people think they are buying one horse, but they end up getting a completely different one. The more particular you can be about the description the better. Photographs or videos would be great in this scenario.

“So the buyer has to be very careful about the description, and the warranties (is it AS IS, or do I want a warranty in there). I have not seen too many cases where the seller did not have title, showing they were the actual owner. But what you want as a buyer is more. You want it to be suitable for its intended purpose. You also want a fitness for purpose.

“And one other important thing to look for in a Bill of Sale. In California and in most states, there may be a dispute provision that will say something like, “In the event of a dispute, jurisdiction will be in the state of California, and the laws of the state of California will apply. And we agree that in the event of a dispute, the prevailing party gets their reasonable attorneys’ fees and costs.”

Randy continued on that subject. “Many times, a seller does not want that clause, because if they are going to commit fraud, they know that if there is a problem, and there is no attorneys’ fees provision, the other side might be more reluctant to bring a lawsuit, because they will say, “We are going to spend a lot of money on attorneys’ fees and litigation, and we can’t recover our fees if we win.” So, you as a buyer, if the proposed Bill of Sale does NOT have an attorneys fees provision in it, you should be very concerned, and you should tell the seller you want it. You have nothing to lose by getting that.”

Another thing to remember about a Bill of Sale. You can have one with both the seller and the buyer having signed it. In that case, you have a good contract, assuming it meets the other requirements. If it is partially signed, you have a better chance of having the court finding it to be a good contract, but the other party might say that they didn’t sign it because they didn’t agree with it. The last option is that nobody signed it. In that case it is very weak to argue the Bill of Sale as controlling. At best, the court might look at it and consider it, but there are other factors for them to consider.

Finally, one more thing that Randy feels very strongly about, and this is probably the most important part of this article.

“Many times, a seller will tell a buyer, “We have to do this right now, there is a third party in the wings waiting to buy this horse!” I would tell them to send over a Bill of Sale, and when we have both signed the document, then they will get your money. You have to have enough patience and wisdom to not be rushed. If you get rushed into a deal, don’t do it! There are a lot of horses out there.

“The seller will tell you that every time, and you are going to regret being rushed. And later on, if you have to litigate to get your money, it’s very expensive and uncertain. Have the patience, wait until you get the Bill of Sale that you really want, and you will be better off for it.”