Non-Compete Agreements and Horse Training: Do They Go Together?

Unless a trainer owns their own facility, or received a very large inheritance, the trainer will provide services out of another’s facility.  Generally, they will lease the grounds from the owner.  In return for using the facility, the trainer will pay the ground’s owner an agreed upon amount each month.  This can be good for both the trainer and the barn owner.  The trainer will make money by training horses at the facility and the barn owner may obtain some new boarders who want their horses trained by the trainer.

However, this can lead to problems for the both the trainer and the barn owner. For example, what happens when the trainer wants to move barns and take boarders with him or her? To prevent this situation, a barn owner may request that the trainer sign a non-compete agreement.  This article will explore what a non-compete agreement is and how it may help or hinder your equine business.

A non-compete agreement is an agreement (or contract) where one party agrees not to provide same or similar services in competition with the other party. For example, a horse trainer using another’s facility may be asked to sign an agreement not to provide training services at another’s barn with a 30 mile radius for a period of three years following the trainer’s departure from the current facility.  

Generally speaking, non-compete agreements are only enforceable if tailored to protect the legitimate interest of the employer.  For a barn owner, this may be problematic because the horse trainer may not be considered an employee.  However, this area of the law varies from state to state, so you should check your state’s laws regarding non-compete agreements.

To be enforceable, the non-compete agreement must be reasonable in its terms and supported by valid consideration.  When a court looks at whether the agreement is reasonable, the court looks at the duration of the agreement; the geographical region of the agreement; and the scope of the agreement.  The courts will balance the employer’s interest, the public’s interest, and the employee’s ability to earn a living. The agreement should be no broader than necessary to ensure that the employer’s legitimate business interest is protected.

So, what does this mean for a barn owner/horse trainer relationship?  First, as a barn owner, you need to decide if you are employing the horse trainer or simply allowing the horse trainer to lease your property.  If the horse trainer will be an employee then a non-compete agreement will be an appropriate tool for you to use to ensure that your legitimate business interest (boarding clients) is protected. 

If you are allowing the horse trainer to rent your facility for a fee, but are not employing the trainer, then you are faced with a tougher situation. You can have the horse trainer sign a non-compete agreement, but I would have to question the agreement’s enforceability, especially in today’s economy.  Instead, you may consider negotiating special terms in the lease agreement.  For example, if you are worried about the horse trainer taking boarders with him or her if she leaves the barn to train in other facility, you may include a non-solicitation provision in the lease agreement.  A non-solicitation provision, if properly drafted, would prevent the horse trainer from soliciting boarders to move with the trainer. 

A non-compete agreement can be a valuable tool for a barn owner.  However, the agreement must be drafted and used appropriately to ensure that the barn owner and the horse trainer are both protected.  To often, these agreements are lop-sided and only protect one party over the other.  If you are considering using a non-compete agreement in your business, I recommend that you contact an attorney to discuss your needs.  There just may be a better way to protect your business. 

When the Inevitable Happens: Who Will Care for Your Horses When You Can’t

When most people think about estate planning, they think about what is going to happen to their family and personal belongings after they pass on or become disabled.  To a horse owner though, their horses are just as big of a part of their family as their children.  Therefore, it is important that your equine companions are taken care of even when you cannot take care them yourself.

            Until recently, you may have considered a provision in your will leaving your horses to a relative and hoping that they were cared for as you would.  But there is another option, a pet trust.  This article will explain what a pet trust is and the importance of having a trust in place for the care of your animal.

            What is a pet trust?  A pet trust is an estate planning instrument that allows you to put certain property or money into a trust for your horse’s care when you pass away or become disabled.  The trust will allow you to continue to care for your horse after you pass away.

            Creating a pet trust can be difficult, but an experienced attorney can help you through the process. When you create a pet trust, you become the settlor of the trust.  In the legal field, this means that you will place property in trust for the benefit of beneficiaries.  The property could be personal property or money. 

You will name a trustee who will be responsible for carrying out your wishes regarding your horse’s care.  The trustee will be the person or organization responsible for distributing your trust funds.  The trust document will provide detailed instructions to the trustee regarding how the trust funds are to be used.  For example, you can determine that part of the funds need to be reserved for emergency medical care or special feed.

In your trust you will also need to name a caretaker for your horses.  This is the individual that you want to care for your horses when you longer can.  You may want to include an alternative caretaker in the event that the named caretaker is unwilling or unable to care for your horse.

The trust should also contain very detailed instructions to the caretaker regarding the type of care that you want your horse to receive.  You may want to specify any habits, special needs, or vices that your horse has.  If you have a preference regarding end-of-life decisions for your horse, you will want to list those in the trust.  There are several decisions and guidelines that may be placed in the trust.  Each instruction you place in the trust will allow you to rest assured that you horse will be taken care of to your standards.

            Why is a pet trust important?   In order to understand why a pet trust is important, you have to understand how it works.  To work properly, there has to be assets in the trust.  The only way that assets are placed into the trust is if you, as the settlor, place them there.  This is done be re-titling specific assets of your choosing into the trust’s name.  Without assets, the trust is simply an empty bucket and cannot provide for your horse’s care.  Too often, individuals will set up a trust and never transfer assets into it.  What results can be detrimental to your equine family members.

            Under the law, horses are personal property.  When you pass away, if you do not have an estate plan in place, your personal property goes through the probate court system.  This means that the court may sell your horses to settle any outstanding debts you may have.  By creating a pet trust that is properly funded, you can avoid probate and ensure that your horses remain part of the family.  Additionally, the property that is placed in the trust will also avoid probate. 

            Currently, there are several states that provide for pet trusts. These trusts include traditional pet trusts, such as the one described above. But there are also a number of states that allow for statutory pet trusts.  These trusts do not require the horse owner to make decisions regarding terms of the trust.  Rather, the owner must only use specific language in their will.  When issues arise regarding how the trust is to be distributed, state law fills in the gaps. 

            If you are concerned about caring for your horses after you no longer can, you should consult with an experienced estate-planning attorney that understands equine law.  They can help guide you through the process and provide you with insight into what you may include in your pet trust.

ANNOUNCEMENT

Hi everyone.  First, I wanted to say thank you to all my readers.  I appreciate everyone that takes the time to read this blog.  Second, I wanted to let everyone know that you will be able to find my articles in Equestrian Style Magazine and on the Equestrian Style Magazine facebook page.  I am excited for the opportunity to write for this new publication.

Equestrian Style Magazine is a new publication. To find out more about this magazine, click here.

Happy Riding.

Types of Breeding Contracts

Breeding contracts, or stallion service agreements, will inevitable be used during the breeding season. These contracts are typically prepared by the stallion owners or breeding facilities. The breeding contract details the various fees associated with breeding the mare to the stallion. It also details the various services to be performed by the stallion owner/breeding facility while the mare is in their care. Therefore, a mare owner must make it a point to review each contract thoroughly to determine what type of contract it is.

There are several types of breeding contracts but three that are regularly used.  The first type of breeding contract is a guaranteed live foal contract. This type of contract provides a warranty to the mare owner that there will be a live foal.  Generally, a foal that has the ability to stand and nurse without assistance is considered a live foal.  If the mare fails to produce a live foal from the stallion, the stallion owner will rebreed the same mare to the stallion without charging a stud fee. The mare owner will, however, be charged the other fees that come with breeding: mare care, fees shipped semen fees, collection fees, container fees, and various veterinary fees.

The second type of breeding contract is an in foal contract. This contract is a variation of the guaranteed live foal contract. Typically, this type of contract indicates that the mare owner will pay the stud fee only after the mare is determined to be in foal.  However, the stallion owner does not provide any warranty that the mare will have a live foal.  Thus, if the mare does not have a live foal, the stallion owner is not required to rebreed the mare free of charge or repay the stud fee.

The third type of breeding contract is a no guarantee contract.  These contacts indicate that the mare owner will pay a non-refundable stud fee before the mare is bred. Further, the stallion owner does not guarantee that the mare is either in foal or that the mare will have a live foal. Thus, if the mare does not have a foal, the mare owner will not be entitled to a rebreeding at the stallion owner’s expense.

These are only three of the most common types of breeding contracts used in the industry. There are several other forms of breeding contracts that can be used such as mare lease agreements, foal sharing agreements, and more.  If you need help determining which type of breeding contract you are reading or which type of contract is most appropriate for you, contact an attorney that specializes in equine law. They can help guide you through the details of these documents and provide insight into what is appropriate to protect your future four-legged interest. 

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.

The Law Office of Tracie Dinehart

Hi Everyone!!  I wanted to let you know that the Law Office of Tracie Dinehart is becoming a reality.  I am really excited about this new opportunity.  My practice is located in Ionia County, Michigan; however, it will span the entire state.  I will offer legal representation and counseling in equine-related matters, such as contracts, sales disputes, waivers from liability and much more.  But I will also offer services in other areas of the law as well.  If you have any questions, or just want to talk, feel free to contact me at dinehartlawoffice@gmail.com        Thanks, Tracie

Registration Papers and Ownership: Does One Prove the Other?

           

As a horse person for many years, I was shocked to find out that registration papers do not necessarily prove ownership of the horse.  I know what your thinking, “How could that be?”  To tell you the truth, it took me going to law school to really figure it out.

Imagine this situation. You buy a horse from someone on an installment contract (meaning you regular make monthly payments).  As part of the agreement, you and the seller both agree that you can take the horse home, but the registration papers will not be transferred or turned over until the last payment is made.  You get your new companion home and the neighbor comes over. Out of the blue, the horse bolts injuring your neighbor. The neighbor sues the person listed on the registration papers to recover for her injuries.  Does that seem fair to you? I mean, you just bought the horse.

In the horse industry, it is common belief that if your name appears on a horse’s registration papers, then you are the owner. However, in the example above, the person named on the registration papers was not the owner. You are. Some courts have determined that the name that appears on the registration papers may not be the true owner of the horse.  In the example above, that is precisely that case.

So, how does a horse owner void these types of disputes?  Well, as a good friend once told me, “Get it in writing.”  When you sell or buy a horse, demand a sales contract or a Bill of Sale. This will allow you to layout the agreement in full.  If you are selling a horse to someone else on an installment contract with the intention to transfer the registration papers after the last payment is made, put it in writing. Then, if a legal dispute did arise, as the seller you would be able to indicate that he/she is not the owner of the horse. You are merely holding the registration papers as security for payment.  Think about what banks do when they hold your car title until you have paid off the auto loan. They are not the owner of the car, and they certainly would not pay for any injuries if you got in an accident with another person. 

Doing business on a handshake is what gets a lot of equine professionals in trouble.  Put it in writing and protect yourselves and your companions. Stay tuned for the next post regarding what should go in an equine sales agreement to provide that protection. 

Happy Trials!!