Closing the Gate: Why You Need a Bill of Sale When Buying a New Horse or PonyJuly 12, 2012 – Articles
As seen in Pony Club News.
It is all too easy to get caught up in the excitement of buying a new horse or pony – but once you have found the perfect equine partner, you cannot overlook the need to properly document the purchase with a bill of sale. A good Pony Clubber would not go through a paddock gate without closing it behind her; properly executing a bill of sale is like closing the gate behind you when you purchase your new horse. The bill of sale shows that the ownership of the horse or pony has been transferred from the seller to the buyer, and the document can protect both parties after the deal closes.
Historically, horse sales were closed with a verbal contract and a handshake; today, even though many states require a written bill of sale when a horse is purchased, some sales are still undocumented or, perhaps worse, poorly documented. Form bills of sale found on the internet are not tailored to the specific facts of the situation. More importantly, without the guidance of a legal professional, there is no way to tell if these forms comply with intricate state laws that require certain terms and disclosures.
Below are several essential elements of a bill of sale; this list is not all-inclusive, as state law requirements vary widely, as will the specific facts of each individual sale.
Elements of a bill of sale
- Identifying the Parties. The bill of sale should specifically identify the parties by stating the name and address of both the buyer and the seller. Identifying the parties is especially important if the sale is being negotiated by agents, such as trainers, so that you know who you are actually purchasing the horse from. The use of an agent, often a trainer, in a horse sales transaction is common. A recent lawsuit involved actor Tom Selleck and a horse he purchased for his daughter, Hannah. The horse came up lame shortly after the purchase, and Selleck successfully sued the seller for fraud. The entire sales transaction had been negotiated not by the buyer and seller, but by the parties’ trainers.
- Identifying the Horse. The bill of sale needs to fully identify the horse being purchased. Usually this information includes the horse’s age, color, breed, gender, name, pedigree, and registration or passport numbers, if any.
- Consideration. The consideration is the amount you are paying for the horse. The bill of sale should state the purchase price, with instructions as to how the seller is to transfer the money to the buyer. In some states, this provision is required by statute.
- Representations. Both the buyer and the seller make certain representations in the bill of sale. These representations are an essential part of the contract; anything the seller is promising about the horse should be in writing. The representations of the seller can include: acknowledging that the bill of sale is a binding obligation; stating that the sale does not violate any laws; warranting that the seller has a clear title to the horse; and stating whether or not there are any warranties with respect to the horse’s health, soundness, fitness for a particular purpose, and so on. The representations of the buyer include stating that purchase of the horse or pony will not violate any laws, and that the buyer has had a veterinarian conduct a pre-purchase examination, if the buyer so chooses. A pre-purchase examination is always recommended.
- Commissions. The bill of sale should acknowledge whether or not any commissions need to be paid to any third party – such as a trainer – and which party is responsible for payment of the commission.
• Risk of Loss. The bill of sale should specifically state when the risk of loss of or injury to the horse or pony passes from the seller to the buyer.
- Governing Law. The parties choose which state’s law will govern any disputes arising from the contract.
- Signatures and Date. Both the buyer and the seller must sign and date the bill of sale. If a third party is signing on behalf of the buyer or seller, that party must have authority to sign the contract.
Three states – California, Florida, and Kentucky – have enacted laws that dictate specific elements of the bill of sale. Not only is a written bill of sale required in most instances in these states, but the laws dictate certain requirements, such as: that the document be signed by both parties and that the purchase price be set forth in writing; that sales commissions to third parties must be disclosed to both parties; and that written consent of both the buyer and seller must be obtained if someone is acting as a dual agent – or sales agent for both buyer and seller – in the transaction. Disclosure of agency – even where state law does not require it – not only ensures that the parties negotiating are authorized to make the deal, but also that all commissions and conflicting interests are disclosed.
Consult with an Attorney
There are legal implications and consequences for every term in a bill of sale. Enforcement of these terms provides a remedy if one side does not fulfill its obligations under the contract. Bills of sale must be tailored to the specific facts of the sale at issue, in addition to complying with state law requirements that vary widely from state to state. For these reasons, both the buyer and the seller are well advised to seek legal guidance to ensure that the bill of sale complies with state law and will protect the parties going forward.