Buyer (and Seller) Beware: The importance of the Sale Contract
This article highlights the terms in a sale contract, enforcing a sale contract, and why having a contract is so important, even in the horse world.
Across Canada, stables are full of business people, professionals, and experienced horse people paying thousands of dollars a year for their horses. Yet, if you asked any of them if they have paper, a sale contract, backing up the purchase of their horses or their boarding arrangements or leasing arrangements, the answer is almost always, “no”! It surprises me that these people can deal in such a light-handed fashion with such an expensive hobby.
Before you say, “damn the lawyers”, you must know a few people out there who were stuck with horses that did not fulfil the promises made when purchased. With no paper, you have no way of proving what those promises were. And unlike a bad car, you can’t just leave a bad horse in the driveway. A horse will continue to cost you money until it is sold or otherwise disposed of.
GOOD REASONS FOR A SALE CONTRACT
The dominant principal to remember when buying a horse is caveat emptor – let the buyer beware! As stated in an old case, Jones v. Bright, (1926) 130 E.R. 1167, ‘If a man sells a horse, generally he warrants no more than that it is a horse.’ It is up to the buyer to become informed about the horse he wishes to purchase. Accordingly, before you start looking for a horse, you should consider exactly the traits and qualities you require in the animal. Soundness is an obvious must, but also consider temperament, vices, age, conformation, and fitness for a particular purpose. Question the owner of the horse on these points. If you do not ask, you may not be told of a vice or other problem that makes the horse unsuitable for you. The seller is certainly not going to volunteer any information about the bad qualities of the horse.
This is painfully evident in the case of Witts v. British Columbia (Attorney General), (1982). Although this related to a claiming race, the point in issue is relevant to a straight purchase. The horse in question was simply listed as a “horse”; the claimant intended to put the horse out to stud and did not realize that the horse was in fact a gelding. The buyer lost his case, because no representation had been made to him about the virility of the horse. You should make no assumptions about any quality that you require in the horse. It is up to you to ask the right questions and get informed so that there are no surprises after the horse is yours. When you get this information, if it is important to your decision to buy the horse, then put it in a written contract. The contract becomes a record of what the seller told you and as such, he will be very careful to tell you the truth. It will also prevent misunderstandings over what was said about the horse.
Sometimes after a horse deal goes sour, one or the other of the parties has a bout of selective amnesia. A seller may not remember the statements he made about the horse and without witnesses to the deal, then how do you prove that your version of the facts is the correct one? If the point in issue is written down, there will be no question of whom to believe.
There will be times when you will need to demonstrate proof of purchase of an animal to indicate ownership of the horse and the purchase price. Without a sale contract, this will be difficult – especially if you paid in cash. Reasons you would require proof of purchase include tax considerations, insurance claims, disputes with other parties, theft, and matrimonial disputes. All of these areas of the law require proof of ownership and purchase price.
TERMS OF A SALE CONTRACT
Every contract of sale will be different, but a simple rule of thumb is the following: “If it is important, put it on paper.” Accordingly, when you are working up the contract, list the points that you consider important in your decision to buy the horse. If you are selling a horse, ensure that the contract contains all the points you wish to include and none that you are not happy to verify.
Some common terms found in sale contracts include: – The names of the parties to the agreement, their descriptions as seller and buyer, and their addresses; – A brief description of the horse; – The price and payment terms. If the full purchase price is not given upon delivery of the horse, then the seller may wish to delay transfer of ownership of the horse until full payment is received; – The date and place of delivery. Consideration should also be given to insurance and at what point the risk passes; – Representations or guarantees that the seller is prepared to make about the horse (this includes representations as to soundness, suitability, age, etc. As a seller, the less you promise about the horse, the better!); – Information about the horse that the buyer considers crucial to his purchase of the horse, such as competition experience, age, fertility, soundness, etc.; – A statement that there are no express or implied terms, conditions, or warranties relating to the sale other than those set out in this document. This is known as an agreement conclusive clause, and is an attempt to limit the representations made about the horse prior to the contract. In Carr-Stewart v. Duke (1999) the seller made pre-contract representations about the physical condition of the horse which were not in the contract.
The contract contained an agreement conclusive clause so the pre-contract representations were excluded and the buyer lost the case. If a contract contains this type of clause then buyers should ensure that any of the pre-contract discussions are in the contract. Sellers should try to insert this clause into the contract, as it can protect them from litigation. Consideration should be given to certain obligations implied into the contract by the Sale of Goods Act. If it is the seller’s business to supply horses (and it can take very little to prove this) and the buyer, expressly or by implication, makes known to the seller the particular purpose for which the horse is required so as to show that the buyer relies on the seller’s skill or judgment, there is an implied condition that the goods will be reasonably fit for such purpose. Inserting an agreement clause could exclude implied conditions and save the seller from the stress of litigation. and – Anything else considered important to the sale (tack, insurance, passports, etc.).
Most sale contracts will contain only some of the points listed above. Make sure that your contract contains the points important to you. The contract should be in writing, legible, signed by each party, signed by a witness, and dated. Make two copies so that each of the parties can keep a copy. If the price of sale is high enough, it is well worth a few hundred dollars to have a lawyer review the contract of sale before it is signed.
ENFORCEMENT OF A SALE CONTRACT
Once the sale contract is signed and witnessed, it is binding on both the seller and the buyer. If one of these parties then breaches the contract, the other party can enforce its terms against the breaching party. Enforcement of a contract is usually done through the court. Note, however, that the use of mediation and arbitration of disputes as an alternative to the court system is becoming very popular. Generally, there are three types of relief a party to a contract can request: specific performance of the contract, rescission, and damages.
A request for specific performance asks the court to order the breaching party to fulfil their side of the bargain. For example, a buyer may obtain an order of the court requiring the seller to deliver the horse to the buyer pursuant to the sale contract.
Rescission is a request to put both parties back into the same position they were in before the contract was signed. Usually, this will only be granted if the deal was materially different from what was understood by one or both of the parties.
Finally, if a seller or buyer is not upholding their side of the contract of sale, the other party can ask for damages for breach of contract. There are different kinds of damages available. Usually, the injured party will ask for an amount of money approximately equal to the expense he or she has suffered as a result of the other party’s breach.
These three remedies are not mutually exclusive, and often damages will be claimed as an alternative to specific performance on rescission in a court action. The facts of the case will determine which remedy is most suitable. The contract itself could also contain a clause dealing with default by one of the contracting parties.
Without a written contract of sale, it will be very difficult to prove your case in court. Whether or not something was said or promised will become an issue of credibility for the trial judge to determine after he hears the story from both parties. Leaving these issues to a judge at trial is risky and expensive. A written sale contract will provide certainty and save a lot of time and money if you have to go to court to enforce it. So please, when buying or selling a horse, put it in writing!! Your lawyer and your bank account will thank you.
Catherine Willson is a lawyer practising in Toronto, Ontario. Willson Lewis LLP (www.willsonlewis.com) is a law firm in Toronto, Ontario. This article contains general information only, based on the laws of Ontario and is not intended to provide a legal opinion or advice. Readers should consult a lawyer with respect to the application of the information contained above to their particular circumstances. Readers may also contact the writer at firstname.lastname@example.org to discuss any specific issues they may have.