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Protecting the Seller and the Buyer During a Trial Period

ranchers shaking handsWho would expect that a simple trial  period arrangement could go bad?  Unfortunately, these arrangements can and  sometimes do.  In the horse industry, sellers often  allow potential buyers a “trial period.” In  some trial period arrangements, a trainer  may take a horse “on consignment” from the  seller with the goal of finding a buyer and  paying the seller later. Or, a cautious buyer  might want to try out the horse for a while  before deciding whether to make a purchase.  These arrangements can invite many  problems. This article discusses five possible  problems and ways to avoid them.

Avoidable Problems in Trial Period  Arrangements  

Problem One: The “buyer” steals  the horse –  Sellers fear the chance of a “buyer”  who wants a trial period, promises to pay  later, hauls away the horse, and then disappears.  Here are three ways to prevent the  problem:  * Require Payment Up Front.  Sellers can demand full payment now  and allow the buyer to return the horse within  a specified time frame for a full refund,  assuming that the horse is in good condition.  * Registration Papers Until the Last  Payment  If the buyer needs the horse’s registration  papers to breed, race, show, or re-sell  the horse, the seller can keep the papers  during the trial period but sign them over  after the buyer pays in full.  * Make the Transaction a Lease With  Option to Buy.  The parties can enter into a lease  agreement that includes an option to change  the transaction into a sale under specified  terms. During the lease, the seller can continue  holding the registration papers until the  “buyer” has paid in full.

Problem Two: During the trial period  the horse injures the buyer –  Liability is a major concern during trial  periods. Through these arrangements the  seller owns the horse, but there is no telling  what the buyer will do to test him out.  Sellers can protect themselves by doing a  few things:  * Make the “Buyer” Sign a Well-Written  Liability Release (Where Allowed By Law).  In most states, courts will enforce  properly worded and presented liability  releases. Sellers can insist that buyers sign  a well-written release in addition to the trial  period contract. What goes into a well-written  release of liability will vary with the law of  each state. A knowledgeable attorney will  explain the requirements and limitations  based on the applicable state’s law.  * Liability Insurance.  Horse owners might want to buy a policy  of liability insurance that is designed to  “follow the horse” at any location where the  horse might be during the trial period. One  example is personal horse owner’s liability  insurance policy.

Problem Three: Someone else gets  injured during the trial period –  Because the seller retains ownership of  the horse during the typical trial period, this  places the seller at risk of being sued by  anybody who claims to be injured from the  horse. A release signed by the potential  buyer is not enough to protect the seller  against claims of other people who might be  injured by the horse, such as a motorist who  collides with the horse if he wanders into a  road. Sellers can protect themselves in several  ways, one of which is a policy of liability  insurance that is designed to “follow the  horse” at any location where the horse might  be during the trial period.

Problem Four: The “buyer” returns  the horse lame or ill –  Here are two suggestions for how sellers  can protect themselves from this problem:  * Keep the Horse.  During the trial period the seller can  insist on keeping possession of the horse  but allowing the potential buyer limited  access. Sellers can also set basic rules and  restrictions for the horse’s use such as  hours, places where the horse can be ridden,  permitted riders, and others. This  arrangement will give the seller a better  chance to monitor the horse’s care and  attention.  * Equine Mortality and Major Medical  Insurance.  If the horse is insured with a policy of  equine mortality or major medical insurance,  the policy is designed to respond if the  horse’s health should take a bad turn during  the trial period. Make sure the potential  buyer knows about the insurance and is  aware of the insurer’s emergency contact  information and the need to notify the insurer,  as well as the owner, of any problems.  * Veterinary Care.  The parties can identify a specific veterinarian  or clinic to attend to the horse if he  becomes injured or ill during the trial period.

Problem Five: No written contract –  Both parties to a trial period arrangement  will benefit from a carefully worded  written contract that protects their interests  in the transaction. The most effective written  contracts are designed to foresee and,  as much as possible, prevent disputes  before they happen. This takes careful  attention and planning. The cost to hire a  knowledgeable lawyer to draft a contract is a  small fraction of the cost to hire a lawyer to  handle a lawsuit.  This article does not constitute legal  advice. When questions arise based on  specific situations, direct them to a knowledgeable  attorney.

 About the Author  

Julie Fershtman is one of the nation’s most experienced Equine Law practitioners.   A lawyer for 27 years, she is a shareholder with Foster Swift Collins & Smith, PC (www.fosterswift.com) and has successfully tried equine cases before juries in 4 states.   She has drafted hundreds of equine industry contracts and is a Fellow and officer of the American College of Equine Attorneys.   She has spoken on Equine Law in 28 states and is listed in The Best Lawyers in America.

For more information, visit  www.fershtmanlaw.com,  www.equinelaw.net, or  www.equinelawblog.com.

 

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[Written by Julie Fershtman & published in Performance Horse Digest, Volume 1, Issue 4.]

Have you had a good (or not-so-good) experience leasing or offering one of your horses for a ‘trial period’?  Spill your guts!

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