Equine Bills of Sale: Non-Uniform Requirements – How to Keep It Straight!March 21, 2017 – Articles
Because of the significant dollar value of our horses, and their importance to us, both buyer and seller need to be protected at the time of a horse sale, and the execution of a bill of sale is an essential part of any sales transaction. Many states have statutes that require a bill of sale and determine its contents and, because the sale of a horse is considered a sale of “Goods” under the Uniform Commercial Code (UCC), every horse with a value of $500 or greater should be subject to a written bill of sale, regardless of state. This article specifically addresses the relevant statutes in California, Florida, Kentucky, and select Virginia statutes.
Purchase price floor
The equine bill of sale statute in Kentucky requires a bill of sale when the purchase price exceeds $10,000. However, because UCC Article II also applies, the “Statute of Frauds” requires the purchase of a horse in every state in excess of $500 to be in writing.
Differences in state requirements
California, Kentucky, and Florida all require that a bill of sale be in writing, that it set forth the purchase price, and that it be signed by both buyer and seller or their authorized agent(s). Florida includes several additional requirements, including the name and address of the buyer and seller, the name of the horse, the horse’s sire and dam, the breed and registry status of the horse, the age of the horse, the date of sale, and a confirmatory statement. The confirmatory statement is a statement by the owner promising that they are the lawful owner of the horse and that they are authorized to convey legal title to the horse.
Warranties, disclaimers, and disclosure requirements
Florida also requires a warranty/representation statement in a bill of sale. The warranty/representation statement indicates that the buyer is relying only on the warranties and representations contained in the bill of sale regarding the horse’s age, medical condition, prior medical treatments, and liens or encumbrances. Any gaps in the contract will be filled in with “gap-filler” provisions from the UCC of the state at issue – which may not be advantageous to the buyer and/or seller. These gap-filler provisions would provide for the inclusion of implied warranties for a particular purpose and of merchantability in most situations, which can come as a surprise to an unaware seller.
In order to avoid the implied warranties provided by the UCC in any state, sellers must include a disclaimer statement in their bill of sale which states that they make no warranties, express or implied, as to the condition, health, confirmation, etc., of the horse. In order to completely eliminate the implied warranties of merchantability or fitness for a particular purpose, one must expressly do so, using those words, and qualify the sale of the horse “as is”, as well as ensure that the disclaimer language obvious in the contract.
Florida requires the disclosure of certain medical treatments if the treatments occurred within the past seven days, including shockwave therapy or blistering treatments. Neither California nor Kentucky require the disclosure of specific medical treatments. Contrast this with disclaimers in the Conditions of Sale for public auctions in the thoroughbred world. For example, the Conditions of Sale for Keeneland list several conditions of a horse that must be disclosed through a veterinary certificate and placed in the repository for prospective buyers to inspect. These conditions include, but are not limited to, a deviation from the norm in the eye, a history involving invasive joint surgery of a horse less than two years of age, or history of nerving. Keeneland also requires the announcement of certain conditions prior to sale, such as whether the horse is a cribber and whether the horse is a cryptorchid or a gelding.
Which state law governs?
Critical to your bill of sale is to determine which state law governs. If the seller is in Florida and the buyer is in California and the horse is showing in Kentucky at the time of the sale, a determination should be made as to where “closing” occurs and a given state’s laws should be selected and identified in the contract. State law will also govern which state’s sales and use tax rules apply.
Farm activity statute
Kentucky, Florida, and Virginia have what is called a “Farm Activity” statute. The statutes provide an “equine activity sponsor [or] equine professional” a shield from liability for injury or death resulting from another’s participation in equine related activities. Differences between the states are important. Kentucky requires the farm professional to hang signage on or near the areas where the farm activities are conducted, and also requires that “[e]very written contract entered into by a farm animal professional or by a farm animal activity sponsor . . . contain in clearly readable print the warning notice specified in subsection (3) of this section.” Florida requires only the signage, and Virginia merely purports to exempt the sponsor or professional from liability without requiring signage. Best practices would include using this liability limiting language in any bill of sale. Insert the language just above the signature line.
A well-drafted bill of sale should also include agency relationships, especially in California, Kentucky, and Florida where this is statutorily required. All three states require prior knowledge and written consent of the buyer and seller when an agent is going to represent both the buyer and the seller in the transaction (dual agency). Dual agency is a problem because it can lead to claims of fraud, breach of fiduciary duties, or collusion since the agent represents individuals on both sides of a transaction. Additionally, it is unlawful for an agent to be compensated in excess of $500 without disclosure in writing and written consent by the buyer and seller.
Violation of these statutes
Each state provides for different consequences for non-compliance with the bill of sale. In Florida, a violation of a statute resulting in actual damages is considered an unfair and deceptive trade practice. In Kentucky and California, a person injured as a result of a violation of the requirements of the bill of sale statute can collect treble damages from the violators, and the violator is required to pay the cost of the suit, expenses of litigation, and attorney fees. A potentially very expensive lesson.
Because of the complexities and non-uniform nature of equine bills of sale in each state, both the buyer and the seller should seek legal guidance to ensure that their bill of sale complies with state law and that it will protect all parties involved.