California Riding Magazine • October, 2009

Get Protected!
Contracts are especially important when
buying horses in mid-level price ranges.

by Polly Hey Panos, of Hey & Hey Attorneys at Law

If you are involved in the purchase or sale of a horse whose price ranges from $7,500 to $50,000 and the transaction goes south, you may be left with few remedies. Why? Litigation is expensive and it often does not make financial sense to file a lawsuit.

Generally, in a case where the horse’s value is in this price range, the attorney fees will outweigh the amount you recover if you prevail. Small Claims Court provides an affordable avenue for recovery in disputes where the amount in controversy is $7,500 or less but this does not help those who have purchased a slightly more expensive horse. As a result of the numerous phone calls we have received from people in this situation, we have come up with five tips to help people buying and selling horses in this price range.

Tip #1 – Always use a written contract.

We have written about this before and cannot stress this enough, gone are the days of doing a deal on a handshake. Draft a written purchase agreement with the essential terms. This is critical when buying or selling a horse of any price and protects both the buyer and seller.

Tip #2 – Attorney Fee Provisions.

In your written contract make sure there are provisions for attorney fees. Generally these indicate that the prevailing party is entitled to attorney fees if the written contract is litigated. An attorney fee provision makes it more feasible to litigate a contract where the horse’s value ranges between $7,500 - $50,000 because, assuming the other party has breached the contract, upon winning you won’t be responsible for your
attorney fees.

Tip #3 – Trial Period.

We have discussed the trial period in a previous issue, however it bears reminding that you can have a trial period where both the seller and buyer are adequately protected. The trial period allows the buyer to determine that the horse is what it was represented to be. Proper use of the trial period can prevent disputes over the written contract.

Tip #4 – Escrow Service.

Use an escrow service to purchase the horse. At Hey & Hey we developed a six-step process that utilizes our escrow service. It provides both the buyer and seller protection in the transaction.

Step #1: Prepare the Sales Contract. Buyer and seller negotiate an agreement with or without the help of Hey & Hey. Then Hey & Hey prepares a sales contract signed by both parties.

Step #2: Pay the Money. Buyer pays the funds for the horse into the escrow account set up by Hey & Hey.

Step #3: Verify the Funds. Hey & Hey verifies that the funds are in the escrow account.

Step #4: Ship the Horse. Seller ships the horse to the buyer.

Step #5: Evaluate the Horse. Buyer receives and evaluates the horse to make sure it is in the same condition as when the buyer saw it and agreed to buy it.

Step #6: Release Funds to the Seller. Hey & Hey releases funds from the escrow account to the seller according to the escrow instructions. 

Tip #5 – Insurance.

Even with a relatively inexpensive horse, having the proper insurance protects the parties and can prevent litigation.

By taking these preventative steps, you can avoid being stuck in the position that many of our callers find themselves in when their case’s value exceeds the maximum recovery of Small Claims Court but whose value is not worth litigating because the fees involved would outweigh the amount recovered.