News comes from California that a jury awarded Tom Selleck $187,000 after the actor supposedly was tricked into buying a lame show horse for his daughter. Purchase price for the 10-year-old horse, named Zorro, was $120,000; the additional jury award was compensation for board and other expenses since the purchase three years ago. Still to be determined at this writing is whether punitive damages will be assessed against the seller, Del Mar horsewoman Dolores Cuenca. Punitive damages are awarded to punish a wrongdoer beyond the amount of money that actually compensates for the economic loss. They generally are appropriate only when there is fraud, a finding that requires intent to deceive the buyer on the part of the seller.
Among the issues at the trial, according to press reports, were whether regular steroid injections to alleviate a soundness problem are standard practice for show horses rather than intent to hide unsoundness from a prospective buyer, and whether an adequate purchase examination was done before Selleck bought Zorro.
The latter raises a fundamental question—is a purchase exam by a veterinarian simply a good idea, a practice that is difficult to argue against, or is an exam a legal prerequisite for a buyer to claim damages from inadvertent misrepresentation or intentional fraud in a lawsuit?
"Due diligence" is a term often associated with high-dollar business transactions, but the idea applies across the board. Due diligence is nothing more than the level of care and investigation that a reasonable person would exercise before taking action, under the particular circumstances of the transaction. There generally are no hard and fast rules; a purchase exam might be a reasonable necessity prior to buying a six-figure show horse, but not for the purchase of a pleasure pony. One rule of thumb is to have a purchase examination performed if losing the purchase price would be an economic hardship for the buyer.
The law is clear, however, that a buyer cannot complain about a problem that readily could have been discovered during a purchase examination, if the buyer chose to forego such an inspection. Article 2 of the Uniform Commercial Code (UCC) governs the sale of "goods," a broad category that includes horses and other animals. The UCC gives buyers the specific right to examine and inspect goods prior to payment or acceptance, but does not require it. If a buyer accepts goods without examination or inspection, assuming there was the opportunity to do so, the buyer has little recourse. It is a different ballgame, of course, if a buyer was not given a reasonable opportunity to inspect the horse, or if the seller actively hid a problem.
There are situations in which a purchase exam is a required part of a horse buyer’s due diligence. At some auctions, such as the upcoming Keeneland September yearling and November breeding stock sales, an extensive "repository" of veterinary information is maintained for buyers’ use. The Keeneland Conditions of Sale state that a "full inspection" of a horse "shall include a review of all Repository information for each horse" and that buyers who do not conduct a "full inspection" purchase horses at the buyers’ own risk. In other words, buyers accept the responsibility for not doing their homework if a problem with a horse is discovered after the sale.
The American Association of Equine Practitioners has guidelines outlining what a buyer should—and should not—expect from a veterinary purchase exam. The guidelines are worth reading to help you decide whether to schedule a purchase exam before buying that horse you’ve had your eye on for a while.