By Polly Hey Panos
California Equine Law Change Affects Trainers, Buyers and Sellers
The days of doing a deal on a handshake in the horse world are gone. While this practice has continued in the horse industry far longer than most any other industry, the Legislature recently amended a statute that now requires written documentation for horse sales. This change affects everyone buying or selling a horse or horses whether as a private individual or as a business.
|California Business and Professions Code §19525 was modified and now requires the following:
All horse sale transactions must be accompanied by a written bill of sale signed by both the buyer and seller or their agents. If an agent is acting on behalf of both the buyer and seller this “dual agency” must be disclosed in writing. Any commission paid to an agent in an amount over $500 must be disclosed in the written bill of sale.
What happens if you are involved in a sale transaction and these new rules are not followed?
If a lawsuit is brought, a person injured by a violation of the statute will be able to recover treble damages from the other party. Treble damages are damages three times the amount of the actual damage. This is significant because a lawsuit that may not be worth bringing due to cost, all of the sudden has a much higher potential damages award.
As a law firm dedicated to the horse industry, we have been involved in numerous horse sales over the years. The following scenario is very common. Both the buyer and the seller have agents representing their interests. Both understand that commissions will be paid on the sale of the horse. The money is transferred through one of the agents, with the commissions being paid and the seller receiving his or her money. The transaction is either completed with no written documentation, or with a very simple bill of sale that does not specify the commissions that were paid. With this newly amended statute, an agent could be sued for not putting everything in writing even though there was an oral understanding of what was to be paid to each party. Not only that, but an agent could be liable for triple the amount of actual damages.
So, how do you comply with the new law?
We recommend to all of our clients whether they are the buyer, seller, or agent, to use a properly written bill of sale for all transactions and to specify to whom commissions are being paid. Since the statute was recently amended, it still needs to be interpreted by the courts and our recommendations may change as that occurs. It should be noted, that simply because there is a written bill of sale disclosing commissions, the buyer or seller of a horse could still be involved in a lawsuit. The focus of the amended statute is on written disclosure of sales commissions and dual agency and does not address areas such as misrepresentation.
We understand that many of our clients feel this was an unnecessary change, however the fact remains that this is now the law. Times change, businesses change, and as in other industries those involved must keep up with the changes or be at risk for more serious consequences.
The revised statute can be read here.
Author Polly Hey Panos is a partner in Hey & Hey Attorneys At Law, LLP, and a horse owner. She welcomes questions and can be reached at (650)216-6012 or at [email protected].