Thursday, November 4, 2010
Why Writing Your Own Equine Sales Contract is a Bad Idea
I know that the equine industry is a very hands-on industry. Horse people often believe that they can do it themselves. They train their own horses. They do their own prep work. They take pride in what they do. As a horse person, I understand. I have been there. However, when it comes to conducting your business, you have to have the proper documents in place. I am talking about your contracts.
Contracts are legal-binding documents that provide certain protections to all parties. They take special skills to draft, and if done incorrectly, they can cost you a lot of time and money. For example: someone sells a horse on an installment contract. The contract states that the buyer will pay the seller $X by X date every month. But the contract does not indicate what will happen when the buyer does not pay. This contract is missing material terms. How can the buyer enforce the contract without a mechanism in place to do so? This is where the dispute begins and your attorney fees rack up.
Here is the kicker (no pun intended), if your contract does not provide for attorney fees then you are probably not going to get them from the opposing party. In the example above, the contract was missing the enforcement mechanism. But, lets say it was also missing a provision that allowed for the prevailing party to collect attorney fees and costs. Without this provision, in most states, you are not going to be allowed to collect your attorney fees. This means you may end up spending more in litigation costs than what the amount in controversy was. This is a risk that could be detrimental to your financial future.
What needs to go in your sales contract? There are numerous provisions that should be present in you contract, but here are the absolute minimum requirements. I caution you all, these are just the minimum requirements. Each contract should be tailor-made to the specific transaction to provide the proper level of protection.
· You must have to name the parties to the contract. Ask yourself, who is entering this contract? Keep in mind, if one of the parties is under the age of 18, they cannot legally enter into contractual obligations. The law finds them ‘incompetent’ to contract.
· You must have the horse, and all registration information, in the contract. This is, after all, the subject of the contract. Include the horse’s full, registered name; registration number; color; markings; year foaled.
· You must have the price of the horse. Include provisions explaining how, when and where payment is to be made and what will happen if payment is not made. If payments will be made over time, give specific dates when payment is due.
· You must determine if you will provide warranties for this horse. If not, then you may consider specific language that you provide no warranties and the horse is being sold on an “AS IS” basis. I caution you all to check your state-specific requirements because this language may not protect you from all liability.
· Finally, you must have the parties sign the contract. Make sure that all parties signing the contract have the authority to sign it.
Again, I remind you that these provisions are the bare minimum required in your sales contracts. There are several other provisions that can go into your sales contracts that will provide you more protection. A knowledgeable attorney can help guide you through the process.