Here is a common situation in private sales of horses: the buyer informs the seller that the horse is unsuitable and wants a refund; the seller flatly denies fault and refuses any refund; the buyer insists on returning the horse (sometimes even returns the horse unannounced) for the seller to resell; and the seller agrees to take the horse back to resell it.
In this arrangement, the buyer erroneously believes or assumes a number of things: the seller has admitted fault despite the protest of innocence (otherwise why agree to a return of the horse); by taking the horse back, the seller now owns the horse (this follows in the buyer’s mind); the horse is now the seller’s problem (since the seller now owns the horse); and the seller will refund the sale price regardless of whether the horse is resold or not (the seller did not attach any conditions or limitations on a refund).
The seller also believes or assumes a number of things: there is no justification to cancel the sale and give a refund (fault is denied); the buyer remains the owner of the horse (the buyer wants the horse resold); the buyer is responsible and liable for the costs of keeping the horse pending a resale (the horse belongs to the buyer, but usually the parties don’t address costs of looking after the horse when the arrangement is discussed); and if and only if the horse is resold will the buyer receive any money back on account of the purchase price (this condition, usually unstated by the seller at the time of the arrangement, underpins the seller’s willingness to resell the horse for without a resale, there is no money available to give the buyer).
From a legal point of view, the only thing the parties have agreed on is a resale of the horse. As there is no agreement to cancel the sale and refund the purchase price, the buyer would otherwise have to go to court to obtain an order for repayment of the sale price on the basis of any available cause of action, maybe misrepresentation. The better legal view of the arrangement outlined is that the seller has undertaken to attempt to resell the horse within a reasonable time on behalf of the buyer and on resale, the buyer will be entitled to the proceeds. Arguably keeping the horse is impliedly at the cost of the seller. It would only become legally clearer, however, after a more detailed investigation and evaluation of the facts surrounding the arrangement who bears the costs of looking after the horse in the meantime (including veterinary care), what happens to the horse if no-one is interested, what would happen if the new buyer found out the horse had been returned once already and demanded a refund on grounds whether related or not to the first buyer’s dissatisfaction, or what would happen if someone trialling the horses was injured? Where does the seller stand in these foreseeable but unaddressed situations?
To avoid the legal muddle that the parties unwittingly create by entering into these arrangements, the seller should take the lead and obtain the buyer’s agreement to the following things relating to ownership and custody of the horse in order to place the solution on a firmer legal footing. It might turn out of course that in flushing out the detail, the buyer would consider the arrangement unmatched to expectations: so much the better for the seller to know this at the outset.
First, title to the horse. The sale is valid so the buyer remains the owner of the horse. The seller will take the horse into custody for the purposes of resale on the buyer’s behalf.
Secondly, agistment of the horse. The seller needs to clarify the horse’s level of care (pure agistment, full or partial livery, kept in work). The buyer must pay for these costs or reach agreement with the seller to share them. In pure agistment cases, the law does not require of the seller any minimum standard of care because the buyer has not entrusted the seller to do anything for the horse. But the horse might not present well if just left to graze in a paddock. If the seller agrees to look after the horse, then a legal ‘bailment’ is created: the seller has legal custody, control and responsibility to care for, the horse. The duration of the agistment and what is to become of the horse if not resold must be addressed.
Thirdly, risk to the horse. The horse is at the buyer’s risk as regards injury or death and the buyer should decide whether to insure the horse. Unless the horse is on pure agistment with the seller or the seller otherwise expressly disclaims all liability, including negligently caused harm or death, the seller must take reasonable care of the horse and is legally liable for not doing so. The details of the seller’s agreed care obligations and other factors will set the standard of care expected of the seller by the law.
Fourthly, the sale. The seller is acting as the buyer’s agent to resell the horse on behalf of the buyer. The agreement with any new buyer will be between that person and the original buyer. The seller is not the owner after all and will not want to be exposed to a second claim.
There is very good reason for the buyer and seller to act in a thorough and open way rather than leave important specifics of the arrangement unspoken or wrongly assumed. What might seem a win-win situation can lead to even more complexity and legal uncertainty if anything fails to go to plan. Lastly, as with all transactions, the parties should commit it to writing.
20 January 2017
© 2017 Michael Mackinnon, Solicitor & Independent Counsel