Monday, November 24, 2008

Contracts: Sales (and then I go back and edit posts)

Buyer Beware or Buyer Protected?

Most of us have bought or sold at least one horse in our lives. Many of us have bought or sold several, so we think we know what we are doing and our legal rights and obligations. The fact is, most of us have no idea what the law covers in this area, but times they are a changing.

A horse is a consumer good. Sounds shocking doesn’t it? The horse I want to sell is just like a toaster or car or large appliance? Yes, it is, and why shouldn’t it be? Buyer is giving you money for something you think is worth enough money to be sold. You sell—they buy. You are the seller and they are the consumer of a “product” If you sell more then a few horses a year you are not only a seller, but also a “merchant” and that opens up a whole other can of worms. So, lets pretend old Dobbin isn’t a draft X hunt horse. Lets pretend Old Dobbin is a refrigerator.

When you see an ad in the paper for a gleaming, shiny new refrigerator shown full of perishable goods on the bottom and frozen good on the top, you assume at least three things: 1) it is a refrigerator in the common use of that word 2) it will keep foods cold to an expected degree and 3) there is a freezer that will keep foods frozen. You probably also expect it is airtight, made of metal, and actually works. In addition, you would be disappointed if you took it home and it had faulty wiring that shorted out and shocked you or caused a fire that burned your house down. I think we can all agree that we have at least these simple expectations for a consumer purchase of a refrigerator.

If these expectations for your new fridge are not met, you immediately desire to return the faulty fridge and expect a full refund. You paid full price and spent your hard-earned money, so why wouldn’t you expect a refrigerator that worked like it should and wasn’t damaged or dangerous? You call the appliance dealer and ask for your right to return your “non-conforming” goods. The person tells you to read the sales contract you signed where its states clearly that this item is being sold “as is” and tough luck, buyer beware, and the item worked just fine when they had it. End if story? Of course not!

The very next day most of us would be frantically googling our state Representatives, State Consumer Protection laws, and calling everyone we know to find out how to GET OUR RIGHTS! “They can’t do that,” we’d opine. They just said sign here and I did! Or worse, the contract didn’t say “as is”—it just said you bought and they sold it. Or there is no contract at all! Just a receipt showing you bought a fridge from dealer X. You are angry. Hurt. Your food is rotting away in your kitchen. Then you call someone like me---a lawyer.

What do I do? I use the laws of the State of South Carolina to protect your consumer rights. Those laws do exist and someone fought hard to get them passed. South Carolina has some of the toughest Consumer Protection laws in the Country. In the end, you would get a new, working refrigerator or the money to buy one and I would get paid more then the darn thing costs in the first place. You would never buy a product from that seller again and eventually the seller would clean up his act or go out of business.

Is that what we expect to happen when we buy or sell a horse? No, its not. The game in horse sales seems to be played a little differently. You see an ad showing a nice Draft X jumping a 2.6” log on an open hillside with a child riding it. The ad describes Dobbin as a “well trained, quiet, field hunting, dressage, and show horse prospect.” Further, he is advertised as “sound, 16.1 and good for a family mount or perfect for a child moving up from ponies or for 4-H.” What does that say to you? To me it implies a reasonably quiet, well-trained, somewhat experienced horse that has been ridden by a child and can do the lower levels of the described disciplines now, or with a little training, soon after I buy him. So do I just scribble out a check, send it to the sellers and expect this perfect beast to be delivered just like a refrigerator? NOOOoooo!

Now the game starts. The seller tries to tell you the horse is just what you’re searching for and you spend considerable time, money, and effort to try and discover what’s really wrong with the horse. You go to look at him. You show up early to make sure he hasn’t been worked down or drugged. You bring a trainer, your best friend and any extra sets of eyes you can round up to find the hidden faults with Dobbin. You come back several times and even fork out hundreds of dollars to see inside Dobbin’s skin in case the undisclosed faults are hiding in there. Dobbin looks good. You can’t find anything wrong with him. You buy him and take him home. You sign a simple sales contract that says “Seller sells Dobbin to Buyer for $X as is”.
Hurray! Your search for that perfect horse for your teenage daughter is over. Dobbin arrives at your farm. Oh happy days. On day 2 you go out to feed in the morning and Dobbin is laying on the ground. Five hours later your Vet determines Dobbin must go to surgery for a bad impaction colic. Off to the Vet school Dobbin goes, your teenage daughter crying the whole way. You arrive at the clinic and three employees all run up and hug your new horse cooing “Dobbin! We haven’t seen you in months! Is him colicking again. Mmmm poor Dobsie” Yes, to put it mildly, Dobbin has a history of colic that you could not discover during all your pre-purchase antics. Did seller know this? Unless Dobbin had has own credit card and access to a truck and trailer, its pretty unlikely he gained his own nickname and the clinic without Seller noticing. Now what?

If you are like most of us you call seller up and complain she sold you a colicky horse and you want to give him back. “Sorry”, Seller says, buyer beware and you bought him ‘”as is”. “He’s fine,” she continues, “Those surgeries only keep him down for 4-5 months and he’ll be ready to ride by Opening Day. He always is” And what do you do? You whine, you yell, you bad mouth Seller all over town, you post “What would you do” messages all over the internet—but you never, ever consider calling a lawyer because, well, Dobbin is a Horse,—not a refrigerator!

And so you keep Dobbin, and the $4K Vet bills, and the monthly expenses for board and shoeing and special feed for Dobbins special tummy and you never, never find out if you had any legal rights. I’m here to tell you that you do. Seller has a legal duty to provide a product that does what it was expected to do. Seller has a legal duty to sell goods that last as long as they should last. Seller even has a legal duty to disclose known defects and if seller does not want to play by the rules, then Seller’s contract should be at least one full page long to disclaim all those implied warranties. The warranties are already there—the Seller must explicitly disclaim them, and lets face it, if someone handed you a full page of disclaimers, wouldn’t you pause long enough to read it and find out the meaning?

What did Seller promise Dobbin was fit and suitable to do? Well, from the picture you might have assumed he could stand up without falling back down in colicking pain. You would assume that a horse suitable for dressage, showing, hunting and riding was sound and healthy enough to do those things, maybe not go to the Olympics, but at least go to a schooling show or two. Dobbin was also advertised as being safe for a child, so there goes any behavioral aberrations like rearing, bucking, bolting, biting or spooking at every blade of grass. If Seller knew Dobbin was not up to these tasks, then the law will side with you. Proving what the Seller knew and when they knew it can be tricky, but in a clear cut case in a world that has google, its pretty hard to hide a horse’s history these days. Somebody out there knows Dobbin and is willing to share. Seller is also promising she actually owns Dobbin and has a right to sell him. You’d be surprised how many times this is not the case.

You intuitively know this when applied to a refrigerator, but until recently, it was hard for people to conceive that the same laws applied to horses. They do. Nobody is saying that if Newbie rider takes horse home, puts it behind barbed wire and rides it once a week Seller will be liable if the horse breaks down or gets injured, but Seller does have a duty to disclose all known defects and advertise honestly what the product they are selling can and can’t do. Nobody needs to put this in a contract—its already there by law when you buy the horse.

The time frame to assert your rights is limited. You must prove the horse came that way when you bought him, but an unseen infection, a long standing tendon injury, or an arthritic condition that can’t spring up over night or even over a few months is pretty unlikely to have happened after you bought the horse. If the horse jumped fine when sold and stopped a few months later, its not Seller’s problem, but if a horse has proved time and time again he will bolt at the sight of a jump, then selling that horse as a jumping prospect wont do. One must actually have some knowledge. Just because Dobbin broke every jump pole on your course (and even a few standards) doesn’t mean he is magically cured because Buyer somehow managed to pilot him around a course with no falls for the first time.

A sales contract that simply states “as is” is not a valid defense. The words are, as we lawyers call them, “terms of art” and must be written in a particular way and in a particular manner. Although 80% of your friends will tell you that ‘as is’ means you have no legal recourse, 80% of lawyers will tell you that’s not true. You have legal rights. Use them. Unlike refrigerators, even a free horse can cost thousands of dollars to keep. Nobody should have to pay hard earned money for a horse that isn’t, and never was suitable, just because they couldn’t find the hidden problems. The burden is on the seller, not the buyer!

So why doesn’t everyone know about these legal rights when applied to horse sales? I have no idea. I sure didn’t know before I went to law school and even many of my professors said the laws didn’t apply to animals. They do. But, because this misconception is so widespread, several states have started drafting and passing laws that specifically, obviously, and with big arrows pointing at the relevant sections, clearly outline the already existing laws and are written to cover exclusively the sales of horses. California, Kentucky and now Florida are considering or have already passed laws requiring full disclosure and other rules that must be followed in the sales of some horses—mostly expensive Thoroughbreds from high dollar auctions, but in South Carolina these laws already exist in our consumer protection legislation and in our Uniform Commercial code that applies to merchants. The law doesn’t care whether it’s the sale of a large appliance or a large animal like a horse. With the changing attitudes toward the buying and selling of horses effecting sales from coast to coast, now is the time to make sure you understand your rights. As either buyer or seller, and get professional contracts drawn up that clearly state what you expect the horse to be able to do, not do, and what remedies you expect for a breach such as paying your legal expenses and paying for the upkeep of a now useless, poor old Dobbin.

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