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Equine Legal Summary Fall 2013

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

This Equine Legal Summary focuses on “fraud” and what it means under California law and the effect of fraud in connection with equine sale transactions. The discussion will include the policy behind the rules of fraud and the remedies available to the defrauded party.

California has legislated multiple statutes which address fraud. Civil Code §1709 states that if someone willfully deceives another with the intent to induce that person to alter their position which causes damage to that person, the person who acted with deceit is liable to the defrauded party for all damages they suffer. In California “deceit” includes an intentional misrepresentation of fact (a suggestion that a fact is true, when the fact is not true and the person making the statement does not believe it to be true), negligent misrepresentation (a claim that a fact is true when it is not true and the statement is made by a person who has no reasonable ground to believe the fact is true), concealment (the suppression of a fact by a person who is obligated to disclose the fact or when facts are given which mislead others), a false promise (a promise made without any intention of performing it), or, fraud in making a contract (committing fraud in the contract formation). These definitions are stated in Civil Code §§1710(1) -1710(4)) and 1572. The evidence required to prove fraud is by a preponderance of the evidence, not by clear and convincing evidence.

A defrauded party to a contract may elect to affirm the contract or rescind it. If the defrauded party rescinds the contract they are to restore any benefit received from the defendant in exchange for return of consideration paid by the defrauded party. Alternatively, the injured party may retain the benefits of the contract (retain a purchased horse) and seek damages for any loss occasioned by the fraud.

When horses are purchased and sold in California it is very important for sellers to remember that a rescission of the sale can be demanded by the purchaser even if an untrue statement was made negligently by the seller. In addition, sellers must comply with the requirements of §19525 of the California Business and Professions Code which requires the use of a written bill of sale in connection with any sale, purchase or transfer of a horse. (This statute was previously addressed in the Winter 2013 Equine Legal Summary). If you are a seller of horses in California it is best to use a written contract with clear disclosure of material facts related to the sale of the horse. Full disclosure of a horse’s health and competition history should be included in the written sale document.

For a sample Bill of Sale for use in California, please feel free to contact Catanese & Wells, A Law Corporation through the firm’s website at www.cataneselaw.com or directly by calling telephone number (818)707-0407.