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Buying a Horse? Do Your Due Diligence

As Featured in the Equestrian Catalog

When we last spoke with Randy Catanese a few issues ago, our discussion centered around the important steps to take when buying a horse. For this issue, we spoke in depth about warranties or the promises related to the health and fitness of a horse in a purchase. We also discussed warranties or promises regarding title to the animal, as well as its past history, with regard to competition and use.

Randy made the point that if someone is buying a horse, one of the basic things to consider is, why is that buyer offering money for the horse?

“They might offer money for a lot of reasons. The primary reason is, the daughter likes the horse. There is no other reason they are buying it, other than the daughter likes it, or perhaps the amateur rider likes it. Another reason to spend money on a horse is that the animal is healthy. No one wants to buy a broken horse. With buyers, the assumption is that the person wouldn’t offer the horse for sale if it was broken.”

Buyers tend to believe that the seller is honest, and that the horse is being offered at a fair price, and they have the expectation that the horse is not broken.

“That assumption is horribly wrong! Whether you are buying the horse for professional reasons, amateur reasons, or just for fun, you need to go into the situation saying to yourself, ‘What is wrong with this animal? Why are they selling it?’

“And if you do that, generally you will have a better outcome, as opposed to loving the animal and buying it for that reason, and not investigating much about the horse, because the person selling it must be honest. Now, that’s not to say that everybody who sells a horse is not honest. What I am saying is that you want to be careful when buying an animal.”

Besides buying a horse because you like it, there are other reasons to pay your money for the animal. One of those is because the horse is healthy. Another is because the horse has competed well, or you think the horse will compete well in competition. Finally, you buy because a horse is of a certain age, or has the color, markings, pedigree, or competition history, and you feel that it is a suitable horse for you.

“In legal terms, what does suitability mean? It means that for example, there is a buyer, who is a mom, and she has a daughter who is 14 years old. They talk with the seller and tell them that the daughter wants to compete at a higher level. She wants to go Grand Prix, and they are willing to pay top dollar to get her there.

“Maybe there is a horse that has already competed and is retired, but would make a good breeding animal, or maybe just a horse to ride. Irrespective of what your reason is, the basic premise is always going to be the same; is the horse healthy, and why am I paying the money I’m paying for it?”

Randy told us that most sellers will try to limit any exposure post-sale. That means that once they sell a horse to a buyer and turn over possession, they don’t want that horse coming back to them, and they don’t want that buyer complaining to them.

“What they will do is say, ‘I am selling you this horse AS IS with all faults.’ That means the seller is telling the buyer that what you see is what you get. The seller is not making any promises to the buyer about the horses’ future health, competition ability, or breeding ability. If the buyer is going to buy the horse, they must make their own decision regarding the purchase, in terms of information or due diligence.”

The sad part of that is, most buyers do not understand that. They finally understand it when there is a problem and have to go to an attorney like Randy. He would point out that there is an AS IS clause, and they normally do not know what that means.

“The seller is going to say that they are buying the horse AS IS. They are also going to have a clause or clauses in the sale document that say the warranty of suitability and merchantability are being disclaimed. So any express or implied warranties are waived.”

When the buyer is talking with the seller, they might say something like, ‘Is there anything I should know about?’ The seller will say, ‘No, this horse is great.’ But once they sign that contract, and the contract says you bought this horse AS IS and you have waived all the warranties, you cannot come back to the seller. He no longer has an obligation to the buyer, because the buyer agreed to that in the contract.

“Horses are defined as ‘goods’ under the Uniform Commercial Code, and that is nationwide. It says that when you buy a good, there is an implied warranty that it is suitable for your purchase. If I am buying a Grand Prix horse, I want that horse to be able to jump at a certain height consistently. I also want a horse that does not have to see the veterinarian every time it competes.

“Let’s talk about the pre-purchase exam for a second. Buyers have this notion that the pre-purchase exam is helpful for them, and the exam is going to protect them from a problem. That’s another fallacy. The pre-purchase exam really helps the seller, not the buyer. That is counterintuitive, because the buyer feels that the veterinarian will find any problems with the horse.”

Randy emphasized the point that the seller is the one protected by the pre-purchase exam. Regardless of the vet that is chosen, what is typically done is this; the vet is looking at the horse the way it is today, and only today. The vet will give the day and date that he looked at the horse, and report what he saw, or did not see. He might mention that he did not see any signs of soreness, for example.

“What they don’t tell you is this; ‘I didn’t do an ultrasound on the horse, I didn’t draw blood on the horse, I didn’t ask to see the prior health history on this horse to see if it had any problems, I didn’t ask if there were any comparison X-rays, I didn’t interview any veterinarians who might have treated this horse, and I didn’t speak with the seller of the horse to find out what they knew about the horse.’

“Sometimes in a pre-purchase exam there will be a series of questions for the owner or the owner’s trainer, where there will be five or six questions, but they are very, very broad. So when the litigation happens later, the buyer comes to the equine lawyer and tells him that he bought this horse and there was a pre-purchase exam, but after they got the horse back to their facility and had it for six months they found out, when X-rays were done, that this horse had a pre-existing condition. Well, had they done X-rays in the pre-purchase, or drawn blood, they most probably would have seen that.”

The seller is all on board for a timely pre-purchase exam, because they know that once that is done, it’s for that day only, and again, the vet will say that he is only opining on that day only. As mentioned earlier, people buy a horse because they like it. They get excited, they want to have it, and they disregard the tell-tale signs. They need to slow the process down.

Another thing that helps the seller, is a test ride, of sorts. The buyer will ride the horse, either at the facility where the horse lives, or at a show in the warm-up rings. The horse was fine and everything was great.

“That helps the seller and not the buyer because later on if there is a problem, the seller will say that the buyer rode the horse three or four times and never complained. The buyer’s trainer was there, everyone saw it, and no problem. Perhaps later they find out that the horse was treated with a pain reliever, and when that wears off, it does not perform as it did during the trial. But the seller had a vet do the PPE, the buyer rode the horse, so the seller does not have to disclose the medication.”

What is the takeaway? You need to get information! If you are a buyer, you want your veterinarian for the PPE to get as much information as they can. If the buyer is pressured into a quick purchase, such as being told someone else wants the horse so buy it now, do not buckle to that pressure just because they have to have it. Why?

“Because later on when there are problems, the attorney for the seller will say, ‘They did the PPE, they rode the horse, they had every chance to get information, they didn’t have to buy it.’ Those are very hard arguments to overcome.

“Generally, the only way to overcome some of those arguments is if you go to fraud. The buyer might say ‘If I had known the truth, which you hid from me, I wouldn’t have bought the horse. Or if I had known what you were telling me wasn’t true, I wouldn’t have done the purchase.’

“That is when sellers do as much as they can to avoid fraud. What they say to the buyer is, ‘I am not giving you any representation regarding this horse. Nothing. You are buying this horse based on your vet doing the PPE, and your own investigation.”

A seller is worried about their reputation and doesn’t want to have a problem. Sometimes they might say to the buyer that they are sorry things didn’t work out, and offer another horse or pony and take back the one that they sold. The buyer might turn that down, stating that the replacement is not what they wanted in the first place.

“The seller then says, ‘What do you want me to do? I don’t believe I did anything wrong, I’m offering you an alternative horse or pony, I don’t know what else you want me to do.’ Very, very rarely, and I’ve been doing this for 40 years, does a seller, once they have your money, offer to return the sales price. That is why, when you are in this industry and you are looking to buy a horse, you have to be very careful.”