Equine Law: When & Why Do You Need a Contract?

In an industry in which a firm handshake is still often the norm for doing business, equine law attorney Kjirsten Lee outlines exactly when and why a written contract is a good idea!

Flickr/Five Furlongs/CC

Flickr/Five Furlongs/CC

When and why do you need a contract? Two relatively straightforward questions with relatively straightforward answers:

When? Any time you enter into an agreement that even remotely resembles a business transaction, partnership, or joint venture.

Why? To protect yourself and those with whom you are contracting.

These straightforward questions and answers do need a little unpacking. In a perfect world, people could enter into verbal agreements and everyone would be on the same page, everyone would do what they were supposed to do and everything would go smoothly. Unfortunately, we don’t live in a perfect world and there are bumps in the road and misunderstandings. Usually these can be cleared up with good communication, but when they can’t lawyers can get called in and what started as a positive relationship can go downhill.

In a perfect world, two people who buy a horse together as an investment and agree to split all costs and then all proceeds would do just that. They would split the purchase price of the horse. They would equally split training, board, farrier, vet and other costs. When they sold the horse, they would split the proceeds.

But what if the barn owner and a trainer purchase the horse together? They split the purchase price, the trainer provides training and barn owner provides board. They split farrier and vet expenses and other costs. When it comes time to sell, one or the other might decide that what they put in – the training or the board – was worth more than what the other one put in. They might then try to demand a greater percentage of the sale proceeds. Without a written agreement stating how the proceeds are to be split, this can become a messy situation and possibly ruin what was a good working relationship.

These situations can get messier still when they involve a professional and an amateur entering into verbal contracts. Many trainers will offer to take training horses in on commission and will charge for training as well as a commission off the sale price. Any agreement like this, as well as any investment purchase of a horse, should be documented in writing.

A contract is essentially a set of rules or guidelines for a partnership, joint venture, or other business relationship. Any time two or more parties do something together with the intent to turn a profit, they are entering into a business relationship. A properly drafted contract lays out the rules for that relationship. It discusses rights and responsibilities, as well as how to deal with disputes. If the lawyer drafting the contract does their job properly, when a dispute arises the parties can go to the contract and it will tell them how to resolve the dispute. This is why well-drafted, individualized contracts are essential to any business relationship – boilerplate contracts off the internet just don’t do the job!

For more of Kjirsten’s articles on equine law, click the #EQUINE LAW hashtag at the top of this page, or click here to open a list.

Kjirsten Lee, J.D., is an equine attorney with rb LEGAL, LLC, in Golden Valley, MN. She has written on topics such as the Horse Protection Act and use of drugs in racehorses, as well as general legal issues that horse people may encounter. You can follow her on Twitter at @KMLee_Esq. Kjirsten and her OTTB, Gobain, compete in dressage and eventing.

Disclaimer: Nothing in this article is intended to be legal advice. No attorney-client relationship is created by reading and/or commenting on this post. If you are seeking legal advice, please contact an attorney directly.

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