HAVE I GOTTA HORSE FOR YOU…
So I’m sitting in my office working. O.K., so I wasn’t working, but I was thinking about working and in walks Kindah Onist.
“Thanks for seeing me on short notice, I have small problem and thought I should consult with you - just in case…” Kindah Onist said.
Over the years I have learned that when a client says “small problem,” sometimes it’s shorthand for big, huge, beyond imagination or even catastrophic problem. Likewise, when I hear “just in case” decoded, that often translates to “oh boy, am I in trouble something awful.” In either case, it usually time to shift into the Super Sharp Lawyer mode. But, I digress.
“My friend, why don’t we just call him “Friend,” just sold his horse named Nothin Showin. Now, I wasn’t involved in the sale, but I’m just curious. Let’s say, just for instance of course, that somehow Friend sorta forgot to tell the buyer one or two things. What would happen?”
See, what did I tell you about small problems? Just to make sure, I needed to find out more and so I asked, “Well, that all depends. Let’s start with what Friend forgot to mention?”
“Oh, not much, just one or two minor details.”
“And what would those minor details be?” I asked.
“Ahhh, you know, just kinda quirky behavior, that sorta stuff, probably nothin’ big cause it just started recently.”
Sure, everyone always comes to see me over “nothin’ big” stuff. “What kind of quirky behavior would we be talking about?” I asked.
“Oh, like spinning uncontrollably and kinda jumping around.”
“Jumping around? Do you mean hindquarters above the ears kinda of jumping around?”
“Uh, yeah, kinda.”
“When do these ‘quirky behaviors’ present themselves?” I asked.
“Oh, only in the dressage ring. That’s why it’s not a big deal” was the cheerful reply.
“I don’t suppose you would know what kind of horse your friend sold and what its training was,” I asked Kindah Onist.
“Sure, it was a Trakehner and was trained for Three Day Eventing. Is that a problem?”
“Only in the dressage event,” I replied. “Trakehner; high end, expensive, favored by high- level competitors in disciplines like Eventing. Did your friend’s buyer mention anything about what the horse would be used for?”
“Sure, said three day international level, or something like that.”
“So, let me ask you, is it possible that someone buying a horse that costs as much as a Mercedes and is competing at what is considered by most to be a very serious level of competition just might possibly be concerned about unpredictable bucking and spinning during the formal demonstration of precise control, and technique portion of the competition?
“No.”
“No?” I asked.
“No.”
“No?!”
“No as in no, he cost more than a Mercedes, more like a house.”
“A house? Like a small house?”
“Like four bedrooms, lots of bathrooms, granite in the kitchen and a pool kinda house,” was her reply.
“O.K., So, Do you think that this buyer who is competing at a level that few people ever come close to and is willing to spend more on the horse than the average house costs in the U.S. would want a horse with major issues? Especially issues that will prevent the buyer from competing at his advanced level?”
“Well, if you put it like that…” Onist started.
“Oh, I do, and I think that the guy in the court room wearing the black robe might also put it like that. I’ll bet your Friend would probably not like what the black robe dude might say next either. So, I think you understand now that buyer may not be getting what though he was because the issues are recent and were not disclosed.”
“Let’s look at the situation from the legal side. Friend has a very specialized, highly trained and extremely expensive horse. Horses like this are pedigreed and come from a few, well known sources. One doesn’t find these horses at the local back-yard stable. It’s safe to say that everyone who has one these horses knows what they have and what they are used for. Given the cost, it’s also safe to say that buyers are going to be very serious and demanding. Thus, I would bet that it’s likely that Friend knows exactly what he had, what type of buyer he would be dealing with and what the buyer would do with a horse of this caliber. The legal significance here is that Friend knew, or should have known, that Nothin Showin’s issues would directly impact the buyer’s decision to buy. Friend’s actual knowledge obligated him to disclose his knowledge to the buyer.”
“Taking it a step further, if Friend convinces the buyer to purchase the horse by hiding issues the horse has and, if the buyer reasonably relied on Friend’s representations about the horse and, if buyer would not have bought the horse if he knew about the issues then, Friend has committed fraud.”
The puzzled look on Onist’s face prompted me to explain further. “If a seller hides facts that he knows, or reasonably should have known, would affect the buyer’s decision to buy, then the seller commits fraud by his silence. There is no legal difference between failing to state a fact and misstating a fact, neither is acceptable. Further, in Arizona, the courts imply the covenant of good faith and fair dealing into every contract. Basically, each party is held to have agreed to act fairly and openly with regard to the deal. Failure to do so may result in liability to the wronged party.”
“So far, Friend has breached the covenant of good faith and fair dealing and has committed fraud. Friend isn’t done yet, he might also be held liable for any injury that arises as a result of the undisclosed issues. An argument might even be made for consequential and punitive damages in addition. Certainly, the claim would be asserted and Friend will have the pleasure of going through the entire trial process just to see what amount of damages he would be held accountable for.”
“Wow, good thing Friend has insurance,” Onist said with an uneasy smile.
“Oh, I wouldn’t bet on that. Many insurance policies do not cover fraud. Friend may be totally exposed.”
Onist thought for a minute and then said, “I think I need to go have a talk with Friend. Hopefully, he can undo the deal before anything happens.”
There was just one small puzzling detail left unanswered that prompting me to ask how buyer failed to detect the issues during the pre-purchase inspections. The answer came without a moment’s hesitation.
“Friend always gives his horses ‘Happy Horsey’ drugs before inspections…”
Remember what I said about small problems? This one was just got a little bigger.
Daniel Rosenfield’s practice in equine and ranch matters is enhanced by his experience in business law and litigation. For a detailed outline on disclosures by seller please send you request to drosen@mrbusinesslaw.com. Phone: (480) 609-9700, mrbusinesslaw.com
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