A written contract serves two important, and related, purposes: It sets out the expectations and obligations of the parties to the agreement and establishes a legal relationship between the parties. The former reduces the possibility of a misunderstanding about who will do what under the contract; the latter allows one party to seek enforcement of the contract in court if there is a breach of the agreement by the other party.

Whether a contract actually accomplishes those purposes depends on how carefully the document is written and whether the language used actually expresses the wishes of the parties. This can be more difficult than it sounds, even when the contract in question is a simple one like a bill of sale.

A bill of sale documents the transfer of ownership from seller to buyer, identifies the horse, spells out how the purchase price will be paid, and addresses any warranties made by the seller. A standard clause in a bill of sale and other contracts is a provision that the written agreement is the "entire agreement." In other words, if something isn’t in the written contract, it doesn’t count. The bill of sale also may, or may not, specify additional conditions of the transaction. These conditions might include restrictions on future use of the horse and the seller’s right of first refusal if the buyer decides to sell the horse in the future.

When novice trainer Kathleen Costello bought the 12-year-old Thoroughbred mare Grand Forks from Rick Trontz, owner of Hopewell Farm near Midway, Kentucky, earlier this year, the bill of sale included such an additional condition. The mare was a double stakes winner at Turf Paradise, but a failure as a broodmare, producing only a single live foal that died shortly after birth. The bill of sale reportedly specified that Grand Forks would not be used for breeding, a sensible restriction given the mare’s dismal breeding record, but the contract did not specifically prohibit a return to racing. Why should it, considering that Grand Forks had been out of training for nine years and was being sold as a riding horse?

Imagine the surprise when Grand Forks showed up as a 50-1 morning line longshot in the entries for a $5,000 claiming race at Churchill Downs on Nov. 18. Trontz told the Lexington Herald-Leader that a return to competition hadn’t been addressed in the bill of sale because it was his understanding that Grand Forks would be used only for riding. Costello responded that the bill of sale didn’t prohibit her from racing Grand Forks, only from using the mare for breeding.

The bottom line: never assume anything. The terms of a written contract trump any assumptions or understandings that are not made part of the agreement, no matter how sensible or defensible those assumptions might be.

Shortly before her first start in nine years, Grand Forks was scratched by the stewards who said they wanted the mare to work out for the state veterinarian before she would be allowed to race. She passed that test, but likely will miss the rest of the Churchill Downs meeting (which ends Nov. 28) due to a required blood test for medications that might mask unsoundness.

It's an all-too-common issue these days: you take good care of your horses, providing food, water, shelter, attention, veterinary care, a farrier, the works, but your neighbor does not. What do you do? An old adage (are there any new adages?) says that if you're not part of the solution, you're part of the problem. That sounds like an unequivocal call to action, and some individuals and organizations concerned with animal welfare feel that doing anything is better than doing nothing.

The danger, however, is creating new problems while trying to solve existing ones. Rescue groups that take in more horses than they can manage sometimes have to be rescued themselves, and good-hearted and well-intentioned individuals create more problems than solutions when they overextend themselves by taking in too many horses that need help.

Is your neighbor neglecting his or her horses out of ignorance, or intentionally abusing them? If it's the former, and if your neighbor is amenable, some friendly advice about basic horse care might solve the problem. "Knowledge is power," according to Sir Francis Bacon. Keep in mind, though, that no one has an obligation to take your advice, no matter how good it might be, or even to allow you on private property to give that advice. There are myriad civil and criminal legal issues associated with horse rescue, including trespass, conversion or theft of personal property, and even libel or slander. Simply being a good Samaritan likely will fail as a defense to a lawsuit or criminal charge.

If your neighbor is intentionally abusing animals, the proper authorities should be notified immediately. No matter how strong or weak the animal welfare laws are in your state, there are few situations in which taking the law into your own hands is a good idea. 

But what about a neighbor who wants to take care of the horses but has fallen on hard times, another victim of a bad economy? Should you take in some of the horses and care for them? While this might be the right thing to do, you should consider the legal ramifications.

First, there should be a written contract that includes, among other things: the business relationship between you and the neighbor (are you partners, for example); which horses you'll be responsible for; how long the animals will be in your care; the standard of care you will provide; whether the owner will provide any feed, veterinary and farrier care, or labor to supplement your care of the animals; who has authority to call a veterinarian and who will be responsible for unexpected and extraordinary expenses such as colic surgery; whether you can expect to be reimbursed by the owner for your expenses at some later date (if so, the date should be specific); and whether you will share in any profits realized if horses in your care are sold.

If there are broodmares involved, the contract should give you decision-making authority over whether animals in your care will be bred. This can be a particularly touchy subject, especially if the owner wants to keep breeding in hopes that the horses will someday be sold for enough money to show a profit. Keep in mind that continuing to produce any product that cannot be sold profitably seldom makes good economic sense. Overproduction and diminished demand are serious problems in the horse industry today, and you do not want to become an enabler who adds to the overpopuation problem.

Finally, remember the law of bailments. This has nothing to do with getting your neighbor out of jail by posting bail, and everything to do with your responsibility for taking care of horses belonging to someone else. If one person turns over personal property (including horses) to another person for safekeeping—-the exact scenario envisioned here—-the person who takes possession of the property has a legal obligation to return the property to the owner undamaged. If one of your neighbor's horses is injured while in your care, you must prove that you were not negligent to avoid legal liability. That can be a difficult burden for the defendant in a lawsuit. Anyone who assumes responsibility for horses owned by someone else should have care, custody and control insurance for their own protection.

If all this seems like too much complication for performing a good deed, remember another old adage: "No good deed goes unpunished."   

A farm owner in Northern Kentucky hired a tree removal service to clean up some fallen tree limbs on his property.  There's nothing peculiar about this; it happens all the time.  The result, though, was unexpected and tragic and led to lawsuits filed against both the farm owner and the tree removal company by the owner of a neighboring farm.

As part of the clean-up process, employees of the tree removal company operated a wood chipper, a mechanical device that grinds limbs into sawdust that can be carted away.  Wood chippers are very efficient—and very noisy.  According to the lawsuits, the racket from the wood chipper spooked some horses in a field adjacent to the clean-up work.  One of the horses ran into something that severed an artery in his neck, causing the animal's death; another horse suffered injuries serious enough that he could not race.  The horse owner claimed that either the farm owner who hired the company, or the tree removal company and its employees, or both, were negligent and caused the injuries to his horses.

Who wins?

This dispute never reached a jury.  The trial judge short-circuited the process by granting summary judgment in favor of the farm owner and the tree removal company.  Summary judgment is a legal result in which a judge determines that there are no facts in dispute requiring a jury trial, and that one party to a lawsuit wins as a "matter of law."  In this case, the trial judge relied on a 100-year-old case to rule that neither the farm owner nor the employees operating the wood chipper had a legal duty to warn the horse owner on the neighboring farm that noise from the machine might scare the horses.

A finding of negligence requires several things:  that the defendant owed a legal duty of care to the plaintiff, that the defendant breached the legal duty, that there was harm, and that the breach of duty actually caused the harm.  If there is no legal duty in the first place, which the trial judge determined, there can be no breach and no finding of fault.  With no fault, there can be no legal responsibility.  Whether the farm owner or the tree removal company employees should have warned the neighbor of the potential risk as a matter of courtesy was not the issue.  While doing so might have been prudent, the trial judge said there was no legal duty to warn.

The horse owner appealed the decision, and the Kentucky Court of Appeals agreed with the trial judge.  The Court of Appeals said that the farm owner and the tree removal company employees were "not acting in any improper manner," that the wood chipper was a "piece of equipment routinely used for tree removal," and that the "landowner and the contractor hired to remove branches did not have a legal duty to the adjoining landowner to warn him of loud noises when performing work upon their property."  The Court also determined that there was no overriding "general duty of care" that covered the situation.

The cases were decided earlier this year:  Wright v. R & M Fence and Construction (No. 2007-CA-001000-MR) and Wright v. Kelly (No. 2007-CA-001014-MR).  The decision is unpublished, which means that it cannot be used as precedent in other proceedings.  The decision does show, however, that in some situations there is no legal duty to be a good neighbor.             

When something sounds too good to be true, it usually is, especially if the promised benefits include a substantial tax break. On October 26, in federal district court in Utah, David Plummer, Spencer Plummer, and Terry Green entered guilty pleas on a charge of conspiracy to defraud the United States. The charge arose from a fraudulent tax shelter scheme called the "Mare Lease Program" that was marketed through ClassicStar LLC.

Tax deductions based on supposed losses generated by the leasing program were used by ClassicStar investors to reduce or eliminate taxes on other income. Some $500 million in fraudulent deductions allegedly bilked the government out of $200 million in taxes. The guilty pleas wrap up one part of the ClassicStar confusion, but others remain, including bankruptcy proceedings and more than two dozen civil lawsuits filed in six states.

More problematic for everyone not directly involved is that the ClassicStar affair reinforces two persistent stereotypes that make surviving in the horse business even more difficult. Common perceptions are, first, that everyone who owns horses is wealthy and on the prowl for a tax shelter, legitimate or otherwise, and, second, that all tax deductions generated by horse activities are shady. The former makes the horse industry fair game for state and federal legislators who are looking for people with deep pockets to plug budget holes. The latter makes it far more difficult for individuals in the horse business to claim legitimate tax deductions in the face of an IRS audit.

Neither stereotype is accurate.

According to the American Horse Council’s economic survey, 34% of horse owners have annual household incomes less than $50,000, and almost half of all horse owners have annual incomes in the $25,000-$75,000 range. These owners are the backbone of the industry, and certainly are not the same people who ran up $500 million in fraudulent tax deductions by investing serious money with ClassicStar.

Nor are all horse activities merely fronts for generating bogus tax deductions. If a horse operation satisfies the Internal Revenue Service tests for a business, the owner should be entitled to the same panoply of tax deductions enjoyed by non-equine businesses. Horse owners and breeders are not inherently dishonest, and any stigma resulting from a few bad apples should not be part of the taxation equation.

The federal government certainly has a legitimate interest in investigating and prosecuting tax evasion. By the same token, however, the government and the IRS must avoid painting the entire horse industry with a brush tainted by the ClassicStar fiasco. Surviving in the horse business is tough enough as it is.

UPDATE: The Tennessee Walking Horse controversy continues. A few weeks ago the Kentucky Horse Racing Commission decided to require some assurances that Tennessee Walking Horses are not being abused in the show ring as a prerequisite to state breeders fund payouts. On the heels of that decision, the Alltech FEI World Equestrian Games board of directors did an about-face and barred the Tennessee Walking Horse Breeders and Exhibitors Association from participation in the Equine Village. Instead, the breed will be represented at the Games by the National Walking Horse Association, which promotes showing without any gait enhancement devices or training methods. The Tennessee Walking Horse Breeders and Exhibitors initially were approved for Equine Village participation and demonstrations a year ago. At that time, according to press reports, the organization acceded to a WEG request and promised not to bring any horses which had been "sored" or had gait-enhancing devices such as padded shoes or chains around their front pasterns.