When most people think of horse sales, they think “as is” or “buyer beware.” While this is true to a certain extent, there are laws which govern disclosure in business dealings and contracts.
As a general rule, under Florida law (and many other states), if the parties are at arm’s length and have similar opportunities to examine or discover facts there is no duty to disclose. However, there are certain situations in which full disclosure is required:
If there is a confidential or fiduciary relationship or if the seller has superior knowledge (for example a trainer and their client);
A party who voluntarily discloses some information about the transaction has a duty to make full disclosure about material facts;
The seller of real property has a duty to disclose facts which affect the value of the property.
Imagine this scenario… a prospective buyer comes to a sales barn and states that she is “looking for a mare for my 12-year-old daughter who competes in the children’s hunter division.” Seller presents a mare, and the daughter jumps the horse around. The horse seems to be a good match. While Buyer’s daughter is jumping around, Buyer asks the Seller, “Is there anything I need to know about this horse?” Seller says no, it’s a great children’s hunter. Buyer vets the horse, which has no major soundness issues, and her daughter competes successfully in the children’s division. A couple of months later, Buyer decides to breed the mare, but finds that the mare can’t get pregnant because of a congenital problem. Seller knew about the condition but did not tell the Buyer, because he did not think it was relevant. Is Seller liable?
The answer in this scenario is … probably not. Here’s why.
The Buyer told the Seller only that she was looking for a mare for her daughter to compete in the children’s hunters. She never disclosed any intention to breed the horse. To succeed in a case for fraud, the plaintiff must prove the defendant made a false representation concerning a material fact and that the Defendant knew the representation to be false. Here the only representation made was that the horse was a great children’s hunter. This was not a false representation.
On the other hand, had the Buyer stated she was buying the mare to breed and the Seller said the horse was fine to do so, Seller could be liable for fraud if the Buyer acted in reliance on that representation. Even if the Seller had said nothing about the congenital defect, his silence could constitute misrepresentation of a material fact, if he knew the Buyer was purchasing the horse for breeding purposes. On the flip side, the Buyer would be under a duty to conduct a reasonable inspection (i.e. prepurchase exam) which could have revealed the defect.
Buyers' disclosures or lack thereof can affect the validity of a horse sale contract.
Sales of horses are governed by the Uniform Commercial Code in all states but Louisiana. The UCC provides for certain warranties, both express and implied, which can protect horse buyers (and sellers for that matter) if a deal goes sour. In the scenario laid out above, the warranty that would apply is called the implied Warranty of Fitness for a Particular Purpose. In layman’s terms, the warranty applies when you buy something for a specific reason. For example, if you go to the shoe store and tell the sales person you want running shoes but he sells you soccer shoes instead, the store has breached the warranty of fitness for a particular purpose.
In the horse example above, the Buyer told the Seller only that she was looking for a mare for her daughter to compete on. She never disclosed any intention to breed the horse. The horse was sold as a children’s hunter, a purpose which it fulfilled. Therefore, there would be no breach of contract based on the warranty for a particular purpose. If Buyer had disclosed she wanted the horse to breed, then she could allege breach of contract.
Let’s change the facts around a bit. Buyer tells Seller that she wants the horse for her daughter to compete on to earn points for the equitation finals. The trial at the sales barn goes well. But Seller knows the horse is a dirty stopper at shows, and does not tell the Buyer. A week later, the Buyer’s daughter takes the horse to a show, but is unable to finish a course because the horse refuses at the jumps. In this scenario, the Seller is liable for breach of contract because he knew the Buyer was buying the horse for a particular purpose and that she was relying his skill to choose an appropriate horse. A reasonable inspection (i.e. a pre-purchase exam) would not have revealed the horse’s behavioral issues at shows. Had the Seller further represented that the horse was an excellent equitation horse who goes around the course beautifully and wins ribbons, he would also be liable for fraud because he misrepresented a material fact that he knew to be false.
The ins and outs of disclosure in horse sales are complex. Contact an equine attorney to make sure you are disclosing everything you should.