We rarely buy or sell a horse without the assistance of a “horse professional.” This person is usually an experienced instructor or trainer; often the professional running the stable from which we or our children ride. Using their contacts, the horse professional can often locate a good horse and determine whether that horse is a good fit for the prospective buyer. Many people also hire a horse professional to help them sell their horse. But how accountable is that person to you?
Legally, an agent is someone employed by a person to negotiate a deal with a third party; the person who employs the agent is called the principal. The agent negotiates on the principal’s behalf. In general, contracts are negotiated between the agent and a third party. In some cases, an agent may even sign contracts on behalf of the principal. However, once the contract comes into existence, the agent is no longer involved, leaving a contract between the principal and the third party. It is only the principal and the third party who should obtain the benefits of any contract negotiated by the agent – and it is only the principal and third party who will be on the hook for any liabilities.
The Duties of the Agent
In a horse deal, there are usually two agents involved: one for the purchaser and one for the seller. If only one agent is involved in a deal, it is a common mistake to assume that they are working for both parties’ interests. While the agent may work with both parties to broker a deal, he or she cannot work for both. Ask yourself – who is paying this agent? If it is not you, you are probably on your own.
Agents in a horse purchase work just like agents in a real estate purchase. They are usually paid a fixed commission for bringing two interested parties together to buy or sell a house, or in this case, a horse. They have the same duties and obligations to their principals.
The agent must perform all acts he has agreed to do on behalf of the principal with reasonable skill and authority, and must not exceed his authority as outlined by the principal. You can give your agent as much or as little authority as you choose in the making of a deal. Your agent can be the sole point of contact between you and the purchaser or seller. If you give your agent a lot of authority to do the deal on your behalf, be careful to ensure that your agent speaks truly, only does what you ask, and understands the financial parameters you require for the deal.
In addition, there are certain fiduciary duties that the agent must fulfill. Fiduciary duties are special duties where the agent has an increased responsibility to the principal because of the special level of trust the agency relationship entails. The agent’s duties include:
1. A duty not to delegate one’s authority without the express consent of the principal. For example, if you have given your trainer the authority to sell your horse, the trainer cannot delegate this job to a staff member without your consent.
2.A duty not to put oneself in a position where personal interests conflict with those of the principal. This can often happen when an agent attempts to represent both sides of the sale. The buyer and seller have interests which are completely opposed – one wants to pay as little money as possible, while the other wants to make as much money as possible. A trainer that sells one of his client’s horses to another client is in a position of conflict and could find him or herself in hot water if the deal goes bad and both clients thought the trainer was working for them.
3. A duty not to accept bribes or secret commissions. A secret commission could be money or some other type of benefit conferred on the agent by a third party of which the principal is not aware. One agent may pay the other agent a secret commission or may trade another horse to get the deal closed. Any benefit received by an agent for a contract must be paid over to the principal.
4. A duty not to take advantage of a principal’s property or the position of agent to acquire a benefit for themself. An agent cannot buy a horse for less than was expected and then pocket the difference. For example, if your agent tells you a horse will cost $20,000, so you pay her $20,000, and she buys the horse for $10,000, pocketing the difference – or if she sells your horse for $50,000 and tells you she sold it for $40,000, pocketing the difference – she would have breached her duty.
5. A general duty to account. The agent must keep separate all monies provided by or for the principal and provide proper records for the principal on request. The agent is entitled to get paid according to his agreement with the principal, including being reimbursed for expenses and indemnified for losses incurred by him while acting within the scope of his authority.
There is a simple way to ensure that a proper accounting is being given to you on the purchase or sale of a horse by your agent: sign the purchase and sale agreement directly with the buyer or seller. If both the buyer and the seller sign the sale agreement, both will know the purchase price of the horse and can ensure that their agents receive the agreed commissions for the sale. There is little opportunity to hide a commission or misrepresent the sale price of the horse. In addition, be clear with your agent on the commission to be received on sale (standard is 10-15%). If your agency agreement is complicated or payable over time, put it in writing. Memories fade and people’s recollections can change.
Caveat emptor – let the buyer beware
When selling a horse, it is also of utmost importance to discuss with your agent what representations they are allowed to make about the animal. There is an abundance of case law that helps define what representations an owner or agent can make about a horse that will entitle the purchaser to a legal remedy against the seller if those facts prove to be untrue.
In Ontario law, an individual is responsible for the fraudulent or negligent acts of their own agent (Scholl v Royal Trust Corp. of Canada, [1986] O.J. No. 1443). That is why it is incredibly important to define what representations your agent is allowed to make and preferably, to put that authority in writing! If you do not want your agent to make certain representations about a horse regarding soundness, suitability, history, etc. – tell him or her!
When buying a horse, the dominant principle applied by the courts is that of caveat emptor – let the buyer beware. It is up to the buyer to investigate and become informed about the horse he or she wishes to purchase. Liability will only shift from the purchaser to the seller if the seller or his agent makes representations about the horse that prove to be false.
Sutton v. Burch, 2011 BCPC 408 – A purchaser bought a show horse to use in competitions for $14,000. In the years prior, the horse had been diagnosed with chronic injuries, rendering it unsuitable for the purchaser’s desired purpose. Knowing of these injuries, the vendors assured the purchaser that the horse had not previously sustained any injuries and that it was suitable for the purchaser’s desired use. The sale contract contained a clause that the vendors were making the sale without warranties of any kind. The court determined that this contract provision could not insulate the vendors from liability, as they fraudulently misrepresented the state of the horse to the purchaser. Damages were awarded in the amount of $25,000. While this case exhibits a situation where the seller knowingly lied about his horse, a seller would also be liable if his agent lied to a buyer.
Lavis v. Mels, 17 A.C.W.S. (2d) 85 (Ontario County Court) – The defendant agreed to sell a show horse to the plaintiff and knew the specific reason for which the horse was being purchased. The plaintiff rode the horse and did not find any issues with it. The defendant warranted that the horse was sound. Several days after the horse was purchased, the plaintiff took the horse to a veterinarian who determined that the horse was not sound. The court ruled that the plaintiff was entitled to rescind the contract, but that the plaintiff was not entitled to any damages because the misrepresentation made by the defendant was innocent, as it was unknown to the defendant that the horse was not sound at the time of sale. Regardless, because the defendant warranted that the horse was sound, when in fact it was not, this entitled the plaintiff to rescission (the return of the horse for the money paid at sale).
Symington v. Breau, [2002] N.B.J. No. 119 (New Brunswick Small Claims Court) – The buyers purchased a horse from a vendor, but the vendor made no representations as to the condition of the horse. The buyers conducted their own inspections of the horse and determined that it was suitable for purchase. Shortly thereafter, the horse was found to be suffering from a disease and the buyers brought an action to rescind the agreement. The action was dismissed because there were no misrepresentations made by the vendor. The buyers inspected the horse, and neither side had any reason to believe that the horse was not in good health. From this case, we learn that where no representations or warranties are made by the vendor, and a purchaser conducts its own inspection, caveat emptor will apply.
One can learn some valuable lessons from the three cases above. If you lie about the soundness of your horse, you may have to return the purchase price and could also be liable for damages such as transportation costs, board, and veterinary bills. If you represent that your horse is sound, but unbeknownst to you it is not, you will likely have to return the purchase price, but may not be liable for additional damages. If you are silent as to the condition of your horse, the liability rests in the hands of the buyer!
Remember that by hiring an agent, you are liable for his or her actions. Be clear about what your agent can say about your horse if you are the seller. As a buyer, make sure that your agent confirms those qualities in the horse that are important to you prior to purchase.
Agents At-A-Glance
- Be certain that you select an agent with an excellent reputation. Seek out some of his or her current or former clients to get their honest opinions.
- Make sure your agent is working solely for you, and not for the other party as well.
- Draw up an agreement outlining your agent’s duties.
- Be specific about the amount or percentage you are willing to pay as a commission.
- Write up a detailed bill of sale that includes the actual purchase price, complete description of the horse, and agreed-on commissions. Make sure it is signed by the buyer, seller, and agent(s).
- If buying, pay the seller with one cheque and write a separate one for your agent’s commission.
- Ask yourself – who is paying this agent? If it is not you, you are probably on your own.
- If you represent that your horse is sound, but unbeknownst to you it is not, you will likely have to return the purchase price, but may not be liable for additional damages.
“It’s none of your business.”
Non-disclosure of sales prices and the difficulty of establishing fair market value.
by Tony Willing, Equine Appraiser
“How much did you sell your horse for?” sounds like a straightforward question, but it is one that many people are reluctant to answer. There are various reasons for this, ranging from commitment to financial, moral, or legal privacy considerations to a simple belief that “It’s none of your business.” Of course, prices of horses sold at auction and even some sold privately do make it into the public domain. Nevertheless, in general, sellers and buyers prefer to keep actual sales prices of horses to themselves.
The decision to not disclose actual sales prices has a downside that ultimately affects the horse industry in general. If you have a horse that you want appraised (for insurance purposes, perhaps), the determination of its fair market value depends on a calculation that involves, among other things, information about actual sales prices of comparable horses that have recently sold in a relevant market. (Note the similarity with real estate appraisal.) If, however, such actual prices are not available, then a crucial component of the calculation is missing. In that case, the asking price of your horse might as well be based on mere hope.
Attempts to overcome this problem are made by referring not to actual sales prices of horses, but to asking prices, which are readily available on a multitude of websites, thus providing a potential database for the calculation of the appraised price of your horse. But asking prices do not necessarily coincide with actual sales prices; what a person asks for a horse can be far removed from what the horse ultimately sells for. There is some optimism that statistically a large bulk of asking prices might be regimented in such a way as to provide data that is somewhat helpful to a worthwhile appraisal result.
The most reasonable estimate of the fair market value of a horse depends on the ability of the appraiser to access the actual sales prices of comparable horses recently sold in an appropriate market. Such access might best be accomplished with the development of a database devoted to actual sales prices of horses, either via an independent website yet to be established, or one of the many that already exist that advertise horses for sale. Clearly, there are details to be worked out. But if professional horse appraisal is to be recognized as a reputable and informed contributor to the development of the horse industry, steps to accomplish this goal are needed now.
