I recently purchased a filly from
out of state to race in California. The seller requested full payment
before allowing the filly to leave the stable and ship to my trainer in
California. I paid the seller and made arrangements for a van to pick
her up. However, before the van arrived to pick the filly up, she
severely injured herself and will not be able to race. Do I have to bear
this loss even when the filly never left possession of the seller?
Surprisingly this type of
scenario occurs in private sales more often than one would think. The
answer to the question involves the legal issue of "risk of
In public auctions the risk of loss
shifts from the seller to the buyer at the fall of the auctioneer's
hammer. In claiming races, the risk of loss shifts from the seller (who
enters the horse in the race) to the buyer (who claims the horse) at the
time the starting gate opens.
However, private sales, both domestic
and international, are different in that the parties involved can (and
should) have written contracts that spell out when and how payment is
made, and when the risk of loss transfers from the seller to the buyer.
Indeed, this writer strongly encourages written contracts to avoid
confusion on this issue.
Absent a written contract providing
otherwise, the risk of loss will generally shift from the seller to the
buyer as a matter of law at the time payment is made—even when the
seller subsequently maintains possession of the horse.
For domestic transactions,
the Uniform Commercial Code has been adopted by most states, and thus
state law will determine when the risk of loss shifts from the seller to
the buyer. In international sales, a foreign country's Sale of Goods
Act, or some equivalent, may govern the risk of loss issue (Ireland's
Sale of Goods Act Article 17 addresses risk of loss). Many other
countries, (including England, France and Italy), have signed various
treaties and trade agreements that govern risk of loss issues in
international sales between their residents.
Interestingly, for pure risk of loss
issues, it generally doesn't matter which state or country's body of law
applies, since most all-domestic and international authorities are
uniform on the risk of loss issue.
Thus buyers should be aware of when the
risk of loss shifts to be sure they have appropriate insurance coverages
in place, if so desired. When insurance is not in place and accident
occurs, the matter is left for the parties to resolve. In most cases,
the risk of loss issue will likely fall against the buyer who has paid
for the horse, although he may still be able to negotiate some recovery
of his loss if he can prove that the other's negligence caused the horse
to be injured.
Note: We offer a sample bill of
sale/sales agreement on our website. Visit
our Forms section.
(This article first appeared in
the January 2000 issue of Owner's Circle and is reprinted
with permission of Thoroughbred
Owners of California)
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