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Thursday, February 23rd, 2012
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4 Potential Pitfalls Of A Trial Period And How To Protect Yourself
By Polly Hey Panos, equine attorney and horse owner
Many people are wary of sending their horse out on trial to a potential buyer, and rightly so. However with the right precautions many of the pitfalls of the trial period can generally be avoided.
Pitfall #1: The horse becomes injured during the trial period. The buyer rides the horse and because of his action, the horse goes lame. Alternatively, the injury could be no fault of the buyerÕs at all; rather it is the result of the horse becoming sick much like a person catches a cold.
Advice: A seller can prevent these injuries in three ways. First, the seller can require that the buyer pay for both mortality and loss of use insurance on the horse during the trial period.
Second, in the horse trial agreement the seller specifies what activities are allowed during the trial period i.e. who can ride the horse, how high the horse can be jumped etc...
Finally, if the seller is very wary of the trial period, he or she can agree to a trial period that takes place at the seller's barn. While this may not be quite as beneficial as having a trial in a different location, it still allows the potential buyer multiple opportunities to determine if they are a match with the horse.
Pitfall #2: Not protecting the seller's liability. A seller could be liable if the horse is out on trial and does something to injure either the potential buyer, or a separate third party.
Advice: There are three ways that the seller can protect personal liability. First, require the buyer sign a waiver, releasing the seller of all liability from the horse. Release forms in California must include specific language to be enforceable.
Second, make sure there is an indemnification clause in the trial agreement. An indemnification clause is one that states that the owner/seller will not be responsible to any third parties that may be injured while the potential buyer is trying the horse. Rather, the potential buyer will be responsible for any injuries incurred by a third party.
Third, the seller should acquire Private Horse Owner's Liability Insurance (PHOLI). PHOLI is a type of insurance coverage that covers the policyholder's legal liability for both bodily injuries and property damage to others because of their horse ownership.
Pitfall #3: The buyer's non-payment for the horse. This can happen when the buyer takes the horse on trial and disappears with the horse without paying.
Advice: There are three ways in California for the seller to protect himself from this situation. First, the seller requires the buyer give payment in full before taking the horse off the seller's property. Coupled with this payment in full would be the seller's guarantee that a complete refund will be given at the end of the trial period if the buyer decides not to take the horse. While some buyers may be hesitant to pay the full amount during the trial period, if the contract is properly worded both buyer and seller can be protected.
Second, structure the trial agreement as a lease option to buy with the lease being the trial period. In a lease the buyer would pay a certain percentage during the trial period and then if at the end of the period the buyer wants to keep the horse the remaining balance is paid.
Third, the seller can use a law firm to act as an intermediary between the seller and the buyer. At Hey & Hey we developed our Safe Horse Ownership Escrow Service to protect both the buyer and the seller during the transaction. Our proven six-step process is an effective and affordable way to protect both the buyer and seller's interests during the trial period.
Pitfall #4: Stableman's lien. A stableman's lien occurs when a buyer takes a horse on trial to his barn and then fails to pay the board which results in the barn owner's ability to place a stableman's or agisters lien on the horse until the board is paid. In other words, the owner of the barn retains control of the horse until all the board payments are made.
Advice: Require the buyer pre-pay the board to the seller and then the seller pays the board to the stables. Alternatively, the seller requires that the buyer pre-pay the board directly to the stables.
Additionally, the seller should always require that the seller be listed as owner with the stables where the trial is occurring. This puts the stables on notice of whom the true owner is and allows them to have an emergency contact for the horse.
If approached with the proper precautions, many of the pitfalls of the trial period can generally be addressed ahead of time, and both the seller and buyer can benefit from the experience.
You’re Invited to Call or E-mail!
“If you have questions or comments about any aspect of law relating to horses,
please don’t hesitate to call or send me an e-mail. I’ll be glad to hear from you --
and promise I will do everything I can to help you!” -- Polly