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Equine Legal Summary Spring 2014

Catanese & Wells, A Law Corporation provides a quarterly newsletter to the equine industry of and concerning legal, tax and business issues for participants in the horse business or sport. www.cataneselaw.com.

This issue of the Equine Legal Summary focuses on recently enacted consumer protection statutes related to horse sales.

The ancient doctrine of caveat emptor – let the buyer beware – was generally prevalent and active as the law applicable to horse transactions throughout U.S. history until the advent of the modern view related to sale transactions of goods and products (i.e., enactment of the Uniform Commercial Code with its express and implied warranties). The rationale behind the caveat emptor doctrine was that a purchaser should examine, judge, and test for himself the good or product to be purchased. The rule was based on the notion that a buyer was in a position to adequately inspect, examine, and determine the condition of a “horse” before the buyer acquired the animal. This doctrine encouraged equine sellers to commit fraud on equine buyers by intentional misrepresentations or by concealment of material facts related to the equine sale.

Over the last 20 years various states have, at the instance of its residents involved in the horse business, enacted laws to protect buyers in the sale transactions of horses. Generally, these laws require a written bill of sale disclosing certain material information about the horse and requiring written disclosure of commissions paid to agents involved in the transaction. Remedies will vary depending upon the state.

Several states have enacted equine consumer protection statutes. The states which have the best protection for a horse purchaser are Kentucky and Florida. California also has a consumer protection statute at §19525 of the California Business & Professions Code. The California statute allows for the recovery of treble damages for persons who are injured by violation of the statute, but the statute does not define how treble damages are to be calculated. Further, California’s statute does not allow for the recovery of reasonable attorneys’ fees and costs if there is a violation of the statute. Both Kentucky and Florida allow for the recovery of attorneys’ fees and costs to the prevailing party in any civil action.

California’s statute makes it unlawful for a person to act as a “dual agent” in an equine transaction unless the person obtains the prior written consent of both the purchaser and the seller acknowledging the dual agency. Further, an agent may not collect a commission in excess of $500.00 absent disclosure to the principals by the agent and the written consent by the principals to the agent’s commission. Finally, the agent is required to provide the principles with copies of any financial records in their possession pertaining to the horse sale.

In late 2013, the United States Equestrian Federation had before it a proposal to change its rules to require a written bill of sale and a disclosure of any agency relationship. This proposal tracked the existing laws of California, Florida and Kentucky. When the proposal was brought to a vote it was opposed and ultimately withdrawn. Catanese & Wells is currently working to have to the proposal reintroduced for consideration by the USEF governing board.

Whether you are a buyer or seller of horses, an agent assisting in a purchase or sale or if you are involved for profit or for pleasure it is imperative that you understand the requirements of these consumer protection statutes. Otherwise, a failure to follow the rules especially if you are a seller or an agent may create unintended liabilities related to the horse sale especially if the horse fails to perform as intended for the buyer.

For further questions regarding equine consumer protection laws or any other equine legal issue feel free to contact our offices.