Are you looking for ways to part with more of your hard-earned money and to create disruption in your life and business? Would you like to increase your chances of getting involved in a costly legal dispute? Where equine-related contracts are involved, here are six ways to help ensure that these things happen:
- Leaving everything to a verbal understanding and nothing to writing. These are just some of the issues that verbal contracts have failed to resolve, and many of these issues have become part of legal disputes: What was the total sale price of the horse? When must the buyer make payment? Was the transaction a lease or a sale? Can the buyer receive a refund of his purchase deposit if the horse fails a vet check? Did the breeding come with a “live foal guarantee,” and, if so, what does that mean? Disputes involving verbal contracts usually become costly and time-consuming legal battles. Why? Because these disputes often become a “shouting match” when each party to the unwritten contract has a drastically different understanding of the same transaction.
When these disputes end up in court, they are often resolved through expensive trials during which the credibility of the parties becomes a key issue. Industry custom and practice and the parties’ prior dealings may also factor into the resolution of certain verbal contract disputes. Written contracts, if they fairly address key elements of a transaction, could eliminate most disputes entirely. At a minimum, the written contract can narrow these disputes significantly.
- Using form contracts without either understanding them or knowing whether they meet the particular requirements in your state. Form contracts, found in books and sold in stores, are convenient and cheap. However, they are not always valid or enforceable. People often learn this the hard way after their form contract becomes the target of a legal challenge. Form contracts often fail to account for important differences in state laws. For example, 37 states (as of August 1996) now have equine activity liability statutes on the books, many of which require certain people or entities to include specially-worded warning notices in their contracts and releases. A form contract will rarely, if ever, include them. Also, some states require certain language to be included within liability releases; form contracts often fail to include this language.
- Losing the contract. Written contracts provide a lasting record of the parties’ understanding in a transaction. This is critical if a dispute later develops. For this reason, keep the contract in a safe place.
- Failing to properly execute the contract. Even the best contract will fail if it has been improperly executed. For example, state laws generally prevent minors from entering into many types of contracts that do not involve the necessities of life. Therefore, those who sell, train, or board horses should be sure to make the minor’s parent or legal guardian a party to the contract. If your state enforces releases and if you use releases, make sure that only the parent or legal guardian signs on behalf of the minor — the signature by a family friend or relative will be legally insufficient.
- Assuming that important contracts, such as releases or waivers of liability, are not worth the paper on which they’re printed. Before dismissing contracts and liability releases as being unenforceable in equine activities, consult with a knowledgeable attorney. You might be surprised to learn that most states have enforced these contracts as long as they are worded and executed properly.
- Failing to consider certain contract terms that could either eliminate disputes or greatly affect the way they are handled. Why fear details? Below are examples of some provisions that could benefit one or more parties but are often left out of contracts:
- A statement that the contract can only be modified in a written document signed by all parties. In your efforts to develop a good written contract in order to avoid the pitfalls of verbal understandings, try to keep verbal understandings out of the modification process. To help accomplish this, the contract can specify that amendments will only be valid if they are in writing and signed by all parties.
- Where can legal disputes be brought? Especially in transactions involving parties from different states or far-reaching areas of a state, consider including language in the contract that identifies where legal disputes, if they arise, must be brought.
- The right of one or both parties to submit a dispute to a court alternative, such as binding arbitration. As this author has explained in past articles and in her new book, Equine Law & Horse Sense, arbitration can be a cheaper and faster alternative to the court system. Unfortunately, parties embroiled in a legal dispute are unlikely to agree on anything, much less agree to submit their dispute to binding arbitration. It makes sense to preserve lawsuit alternatives, such as arbitration, as options now while things are civil.
- Specifying who pays the legal fees if a dispute arises from the contract. Contracts can address this issue by requiring, for example, the losing party in a legal dispute arising out of the contract to pay the winning party’s court costs and attorney fees. Without this language, or without a clearly-applicable statute or court rule that addresses the subject, each party is virtually guaranteed to pay his or her own legal fees.
In conclusion, please keep the following concepts in mind:
- Avoiding written contracts can be a costly mistake. The cost involved in handling a verbal contract dispute through the court system is several times more than having a knowledgeable lawyer draft or review a contract.
- Sometimes the process of entering into a contract can reveal the other party’s sincerity. That is the buyer who promises to make payments over time or the seller who insists that a horse has never been sick or lame ought to put these promises in a contract, if you so request.
- Details in a contract can make all the difference. While in the process of developing a good contract, don’t be afraid to consider them.
This article does not constitute legal advice. Where questions arise based on specific situations consult with a knowledgeable attorney.
Julie I. Fershtman, Esq.
About the Author
Foster Swift Collins & Smith PC
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28411 Northwestern Hwy., Ste. 500
Southfield, Michigan 48034