The Legal Side of Buying a Horse at an Auction
By Karen Weslowski, Miller Thomson, LLP, Vancouver, BC
Buying a horse is an important decision that usually involves careful planning, consideration, and research. Buying a horse at an auction can remove or reduce the ability to exercise due diligence in the buying process.
“Deals” and good quality horses can be found at auctions; however, when attending an auction, buyers may be overcome with excitement for what appears to be a great bargain or sympathy for an obviously mistreated horse, and make a purchase they later regret.
While there is nothing wrong with wanting to score a deal or rescue a horse, auction buyers should be aware of the legal obligations imposed upon buyers, consignors, and auction houses so they can protect their legal rights and, to the greatest extent possible, make informed decisions.
This vintage engraving shows a scene from 19th century Victorian London, depicting a sale at Tattersalls. Tattersalls, founded in 1766, is Europe’s largest bloodstock auctioneer and the oldest in the world. Photo: ©iStockphoto/Duncan 1890
Know the Type of Auction You Are Attending
There may be a considerable difference between the local monthly auction and premium sport horse import auctions or major breed auctions.
The latter types of auctions tend to provide detailed sales programs containing extensive descriptions and photographs of the horses offered for sale, including their pedigrees and show records. Potential bidders may also be provided with an opportunity to ride the horses prior to the auction. In some instances, these auctions may have also pre-screened the horses for health and soundness, in which case there may be vet check results available for review as well. Armed with this additional information, buyers at these types of auctions may bid more confidently.
Buyers at local auctions will often receive little to no advance information about the horses offered for sale. Horses at these auctions are generally presented “as is” and there is no opportunity to ride or examine the horses beforehand. In these circumstances, it is difficult to perform any due diligence to verify the horse’s soundness or suitability.
With either type of auction, it is best for buyers to be armed with a good amount of skepticism; if the deal sounds too good to be true, it probably is. Auctions may be the last resort for owners unable to sell their horse themselves, or horses that have failed pre-purchase vet examinations. Auctions can be used by owners as an attempt to unload an unsound horse on an unsuspecting buyer.
Today’s premium sport horse import auctions and major breed auctions tend to provide detailed descriptions, photographs, pedigrees, and competition records of the horses offered for sale. Some auctions also pre-screen horses for health and soundness, and make vet check results available to prospective buyers. Photo: ©Thinkstockphoto/Matthew Lloyd
The legal maxim of caveat emptor or “let the buyer beware” generally applies to any kind of horse purchase and sale. The seller has a relatively limited duty to disclose information about the horse. As well, unlike many big ticket items, horses usually do not come with money-back guarantees or a return policy. As such, the onus is on the purchaser to fully research the horse before buying it.
Part of a buyer’s research process may include asking the seller lots of specific and direct questions. In those circumstances, the seller has an obligation to fully and honestly disclose information to the buyer. For instance, if the buyer asks whether the horse cribs, the seller must answer that question honestly to the best of their knowledge. The difficulty with auctions is that buyers are generally not provided with an opportunity to ask questions of the consignor, which would give rise to a legal disclosure obligation upon the consignor.
In general, the legal maxim Caveat emptor or “let the buyer beware” applies to any kind of horse purchase and sale. Photo: ©Fotolia/MDB
Read the Auction Contract
- Once the buyer’s bid has been accepted, a legally binding contract is created. The terms and conditions in the auction contract may vary from auction to auction, but most contain the following terms:
- Title passes to the buyer at the fall of the hammer, at which time the buyer assumes all risk and responsibility.
- All successful bidders must sign an acknowledgement of purchase.
- A buyer who fails to sign an acknowledgement of purchase or to pay the purchase price is in default and an action shall be commenced against the person for the amount owing plus legal costs.
- The auctioneer may detain or repossess any horse for which payment is not properly made and may sell the horse at a public or private sale. Any costs incurred in doing so shall be borne by the buyer. The proceeds of sale will be credited to the amounts otherwise owing by the buyer.
- There is no warranty, guarantee, term or condition of any kind as to the health, soundness, condition, ability, performance, or potential of the horse sold at auction.
These terms result in very little practical recourse for buyers against the consignor or auction house. Unless representations or warranties are provided prior to or during the auction, buyers will have no claim against the consignor or auction house for breach of warranty, breach of contract, or misrepresentation.
If vet check results and X-rays are available, the buyer should obtain them in advance and review carefully prior to the auction. If there is time, buyers may wish to provide these documents to their veterinarian to review as well. When these documents are provided by auction houses, the buyer generally has no recourse against the consignor or auction house for non-disclosure or misrepresentation. If permitted by the auction house, the buyer should also have their own veterinarian examine the horse prior to the auction.
What Auctions Cannot Do
An auction house does not have a positive obligation to disclose information about the horses it sells. However, it cannot lie or knowingly make false statements. The mere fact that the sale is occurring through an auction process does not permit the consignor or auction house to fraudulently or negligently misrepresent the horse.
For example, the auctioneer cannot announce during the auction that the horse is five years old when it is known the horse is actually ten years old. If the auctioneer states that the horse is a “good trail prospect,” there must be some truth and accuracy to that statement; otherwise, the auction house risks a claim for misrepresentation.
To succeed in a claim of misrepresentation, the buyer must prove that they relied upon the misrepresentation as an inducement to purchase the horse. In an auction setting, this may be difficult to prove because there is generally no information passing between the consignor/auction house and purchaser that gives rise to reliance.
Statements made by an auctioneer during the auction, such as that the horse is “bombproof” or “safe for any rider,” may be actionable but is more difficult to bring a claim on this ground because this type of description is subjective and open to interpretation. Further, the purchaser would have to prove that the consignor and auction house were aware of a characteristic that disqualified the horse from being accurately described as such, which could be very difficult.
What if the auction house does not make any statements about the suitability of the horse for riding, but has someone riding the horse during the auction, thus suggesting the horse is safe for riding? This is unlikely to constitute any sort of guarantee or warranty as to the horse’s training level or suitability for any purpose. Merely riding the horse in the auction ring without an express statement as to the horse’s training level is not likely sufficient to constitute a representation. The buyer would have to make their own conclusions about the horse’s training level based on the limited demonstration of the horse being ridden.
While the auction house does not have a positive obligation to disclose information about the horses it sells, it cannot knowingly make false statements, such as, for example, misrepresenting the horse’s age. Photo: ©Canstockphoto/Edu1971
Disputing an Auction Purchase
The auction contract may contain terms and conditions which specify the procedure to follow in order to rescind the sale. Typically, a certain type of notice is required within a specified period of time. Some contracts may specifically exclude any right to rescind the purchase. This is something to confirm prior to placing a bid. If there is no right to set aside the purchase, the buyer must be willing to accept all risks that may result from the purchase, including the potential for undisclosed injuries or behaviours.
A claim for misrepresentation could be made relating to an auction sale, but making such a claim could be quite difficult and would turn on the particular facts of the sale and auction terms.
Following the auction, the buyer should save a copy of all advertising for the sale as well as the terms and conditions, and make notes of any conversations with the auction house and/or the consignor regarding the horse.
An auctioneer’s claims that a horse is suitable for any rider is a subjective description and open to interpretation. If the horse proves otherwise, the purchaser would have to prove that the auction house and the seller were aware of a trait that prohibited the horse from being so described. Photo: ©Canstockphoto/RTBilder
Buying a horse at an auction can be a calculated risk, but one that can sometimes pay off after finding the right horse. Although the risk cannot be entirely eliminated, it can be managed and reduced once a buyer is armed with knowledge about the auction process, and the rights and obligations that arise for buyers, consignors, and auction houses.
This article is provided as an information service only and is not meant as legal advice. Readers are cautioned not to act on the information provided without seeking specific legal advice with respect to their unique circumstances and the applicable law in their province of residence.
Main Photo: An auction in the sales ring at Tattersalls Bloodstock Auctioneers in Newmarket, England. Their October Yearling Sale, the biggest sale of the year, can produce bids of up to a million pounds for a horse. Photo: Matthew Lloyd/Getty Images