Currently, anyone in Texas can say they are “ag exempt”, sign a form, and buy agricultural products tax free. But this is about to change. As of January 1, 2012, the Texas Comptroller will require all farmers and ranchers to obtain an Agricultural Sales Tax Exemption Registration Number in order to buy tax-free farm and ranch supplies. This new measure was signed into law during the 2011 Legislative Session via House Bill 268, and will be included in Chapter 151, Subchapter E of the Texas Tax Code.

When I was home in Ellis County last weekend, I heard several farmers grumbling about this new requirement and the added “red tape” being imposed on farmers. But is it such a bad thing? Texas Farm Bureau doesn’t think so.

Texas Farm Bureau discussed the new law and posted information for farmers on its blog, Texas Ag Talks. According to the Texas Farm Bureau blog post, the new “registration number” will be good for the overall agricultural industry, because abuses under the current system were so rampant that the agricultural sales tax exemption itself was at risk. 

I’m not sure what the State’s intent was in enacting this new law, but I don’t think its affects will be good for many horse businesses. I predict that many Texas horse business owners that have been buying ag supplies tax free in the past will not be able to successfully apply for a registration number in 2012 (at least if they are honest on the application). A link to the application for the new registration number can be found here. 

On the very first page of the application, the State boldly warns horse racing, boarding, and training businesses that they do NOT qualify for an ag exemption registration number. Under the list of “principal types of exempt activities” on page 2, the only activity on the list that involves horses states, “I raise and sell horses, mules, donkeys, burros and/or ponies.” The application and other applicable authority suggests that “raising and selling horses” must be your principal activity or your “normal course of business” in order to qualify for the sales tax exemption. The States’s intent with respect to mixed operations such as boarding operations who also breed and sell horses is not altogether clear.  The Comptroller has answered some FAQs about horse businesses that give a little insight on how various circumstances will be treated.  The Horses FAQ page published by the Texas Comptroller can be found here.

Boarding facilities and horse trainers who check the “raise and sell horses” box when they do not engage in said activities do so at their own risk. Page 3 of the application includes a signed statement by the applicant that acknowledges all of the penalties (criminal and otherwise) that may arise from the misuse of the tax exemption ID. I don’t have any data that suggests how strictly these forms are enforced.

But one thing is clear, the State of Texas will have the name, federal tax ID, Texas taxpayer ID, legal entity filing number (if any), mailing address, physical location, and Texas drivers license number for all horse businesses who buy tax exempt products from January 1, 2012 onward. I would think these things would make it much easier for the State to investigate and discipline someone if the State deemed purchases to be to frequent, too large in amount, or otherwise suspicious.  

As under prior law, the sale or lease of horses will still be exempt from sales tax in Texas and a registration number is not required for horse sales or lease transactions.  Further, the purchase of horse feed, grain and hay will remain tax free for everyone in Texas (with or without a registration number or exemption certificate). 

To access a quick reference chart published by the Texas Comptroller that outlines items that do and do not qualify for sales tax exemption for agricultural production, click here.

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Last night’s “All Things Equine” event, held at the National Cowgirl Museum and Hall of Fame in Fort Worth, was a great success. Approximately 60 attendees from across the North Texas and beyond were in attendance. Guests were greeted by the women of the TCU Womens Equestrian Team, who handed out awesome LL Bean-style totes loaded with goodies and materials. 

Pat Riley, Executive Director of the Cowgirl Museum, was in attendance at the event and graciously opened the entire museum and gift shop to attendees after normal business hours.

The evening commenced with an elegant cocktail hour, catered by Reata, put on by hosts US Trust and Marsh.  Afterwards, the panel of experts held their equine business and risk management forum in the Cowgirl Museum’s theater, which was equipped with an excellent PA system manned by Cowgirl Museum staff. 

Here are some highlights from the presentation, in order of speaker appearance:

  • I (Alison Rowe) covered the main sources of business-related disputes involving horses and how to avoid them. The sources of equine litigation I spoke on included 1) transfer of title disputes; 2) fraud and negligence claims involving lameness issues discovered soon after a sales transaction; and 3) partnership / possessory disputes. Some take-aways from my portion include 1) especially for expensive horses, always insist on a thorough pre-purchase exam that includes radiographs of all limbs and a blood sample; 2) never provide a bill of sale or turn over possession of a horse until all pre-sale conditions have been met; 3) put all long-term agreements such as partnerships and training agreements in writing and include all important terms.
  • Gina Teresi of Chartis Insurance flew in all the way from Rochester, New York to discuss the risk transfer features of equine, farm and ranch insurance. Gina’s presentation centered on how important it is for equine and ranch owners to 1) discuss with their agent the specifics of how their horse operations work; and 2) choose an insurance agent who specializes in equine, farm and ranch insurance and has industry experience. Gina discussed ways in which these safeguards help owners ensure that all areas of risk are identified, considered, and covered “in black and white” in the insurance policy.
  • John L. Taylor of US Trust discussed the wide array of corporate fiduciary (trust) assistance that he and his colleagues use to protect the assets of affluent individuals who own horses and ranches. John, a native of rural West Texas, and his team do everything from finding, buying, selling and financing the ranch land, to finding tenants, managing crops or livestock, risk management, enhancing ROI on investments, and working with wealth strategists to make sure that horse and ranch owners’ estate plans are in line with their goals.
  • Logan Fiorentino, hunt seat head coach of the TCU Womens Equestrian Team, explained the process of how horses are donated to her program and answered audience questions concerning things such as eligibility and the scouting process.

After the panel concluded, there was an engaging Q&A session during which attendees posed questions to the speakers. 

The open bar stayed open after the event, and many attendees hung out for a while to chat, exchange business cards, and tour the museum. 

If you missed the event and have questions or would like contact information for the panelists, please let me know.  US Trust and Marsh are planning a similar event for next year, and I will be sure to post information about it when it becomes available.

Next Wednesday (November 9, 2011) the U.S. Supreme Court will hear oral arguments on a case where the main issue is States’ rights to impose their own regulations on federally-inspected slaughterhouses. The case is National Meat Association v. Harris (Docket No. 10-244). Though the case involves swine instead of horses, the Court’s decision might ultimately affect the horse slaughter debate currently being waged in Congress.

The issue before the Court is whether a state law in California requiring all slaughterhouses to “immediately euthanize” any nonambulatory animal on its premises is preempted by the Federal Meat Inspection Act (FMIA). The National Meat case deals with a California law governing slaughterhouses in that state that was passed in 2008, after the Humane Society of the United States released a video of so-called “downer cows” being pushed with a forklift, kicked, electrocuted, and dragged with chains at a slaughterhouse.

If the Court ultimately finds that California (and, presumably, all other states) can impose its own regulations on slaughterhouses to which the FMIA applies within their respective states, this might ultimately affect the current battle over horse slaughter being waged in the United States. An interesting question raised by this case, in my mind, is this:

What if one or more states were to enact laws that made illegal the so-called ‘evils’ of slaughter that opponents of horse processing find so unsavory? Would the opponents of horse slaughter be opposed to the humane processing of horses in those states?"

It’s an interesting question, and I’m torn. While I generally don’t like to see new red tape and new regulations unduly imposed on any industry, I tend to think that most issues such as this are best dealt with on the state level. If the Supreme Court finds that states can, in fact, impose their own laws on federally-inspected slaughterhouses, I am somewhat encouraged that this might ultimately provide vehicle whereby a “win-win” resolution of the horse slaughter battle may be reached.  If humane horse slaughter can be reintroduced in the United States, many horse industry groups believe that that this would have a positive economic impact on the overall horse industry.

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On November 16, 2011, U.S. Trust and Marsh Insurance will be hosting a forum on equine real estate, legal and liability issues in Fort Worth, Texas. 

Photo:  National Cowgirl Museum & Hall of Fame, Fort Worth, Texas

 

Event details are as follows:

Wednesday, November 16, 2011
6:00 PM to 8:00 PM
National Cowgirl Museum & Hall of Fame
1720 Gendy Street
Fort Worth, Texas 76107
 

Panelists will include:

  • John L. Taylor, Jr., Senior Vice President and National Executive for the Farm & Ranch Group at US Trust
  • Gina M. Teresi, Vice President, Strategic Alliances, Chartis Insurance
  • Alison M. Rowe, Equine Attorney, Kelly Hart & Hallman LLP

If you’ll be in the Fort Worth area on November 16, 2011, please let me know if you would like to attend the event.  This event ought to be a great business networking opportunity, and we hope attendees will find the panel discussion and audience Q&A to be interesting and informative.  

To get more information or to request an invitation, please send an e-mail to rebecca dot upward at kellyhart dot com.

 

 

As discussed in this prior post, Chapter 87 of the Texas Civil Practice & Remedies Code now includes as “Farm Animal Professionals” the following categories of service providers, provided that their services are provided for compensation:

1)      A person who rents to a participant a farm animal for the purpose of riding, driving, or being a passenger on the farm animal;

2)      A person who rents equipment or tack to a participant;

3)      A person who examines or administers medical treatment to a farm animal as a veterinarian; and 

4)      A person who provides veterinarian or farrier services.

.

The Act now requires Farm Animal Professionals to post and maintain a sign containing the following warning language in a clearly visible location if the professional manages or controls a stable, corral, or arena where the professional conducts a farm animal activity:

WARNING

UNDER TEXAS LAW (CHAPTER 87, CIVIL PRACTICE AND REMEDIES CODE), A FARM ANIMAL PROFESSIONAL IS NOT LIABLE FOR AN INJURY TO OR THE DEATH OF A PARTICIPANT IN FARM ANIMAL ACTIVITIES RESULTING FROM THE INHERENT RISKS OF FARM ANIMAL ACTIVITIES.

The Act also requires all Farm Animal Professionals to include the above warning language in every written contract that the professional enters into with a participant for professional services, instruction, the rental of equipment or tack, or the rental of a farm animal. The warning must be included without regard to whether the contract involves farm animal activities on or off the location or site of the business of the farm animal professional, and the warning must be clearly readable.

I am currently unaware of any sign manufacturer that is mass-producing these new signs for purchase by the general public. This is probably because the Act just recently took effect on June 17, 2011. Farm Animal Professionals to whom the Act applies and who wish to avail themselves of the new immunities can have signs containing the specific language custom made. It is highly advisable for all Farm Animal Professionals to have participants/customers sign a written agreement for services that contains the warning language. There is nothing in the Act that prohibits Farm Animal Professionals from including additional warning, release, or indemnity language in their written agreements.

Edited to add:  As a member service, the TVMA has ordered a limited number of warning signs on weatherproof corrugated plastic and has them for sale. The signs are 8.5" by 11" and are available to members for $12 and non-members for $15. If you would like to purchase a sign, you can call the TVMA or send an e-mail to info at tvma dot org.

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Forbes.com featured a story this week, entitled “Tax Deductions for Yearling Thoroughbreds”, that may be of interest to many horse businesses. To read the article, click here. Many Thoroughbred racing industry experts are quoted in the article, including Kentucky equine lawyer Joel B. Turner, whose guest post was featured on the Equine Law Blog this Tuesday.

The focus of the Forbes article is the applicability and effect of the 100% bonus depreciation feature of the Tax Relief Act of 2010, and its potential tax benefits to qualified horse businesses. As the Forbes article suggests, some race horse operations who buy yearlings in 2011 may be able to deduct 100% of the yearling’s purchase price in 2011. 

Before the bonus depreciation feature of the Act became effective on September 9, 2010, the percentage of depreciable basis allowed as bonus depreciation on qualified property was only 50%. This 50% depreciation percentage will apply again in 2012.

The potential tax savings offered by the Act for the 2011 tax year are significant for qualified horse businesses. Walt Robertson, Keeneland’s vice president of sales, indicated in the Forbes article that the Act may have positively affected sales activity at the Keeneland 2011 September Yearling Sale. 

It is important to note that the Act does not refer to specifically Thoroughbreds, yearlings, race horses, horses or livestock. The Act provides 100% bonus depreciation for all “qualified property”. In general, “qualified property” is tangible personal property and equipment purchased for use in a business operation, as long as certain conditions are met. For horse businesses, qualified property could arguably include horses, trailers, trucks, tractors, ATVs, and other horse/farm equipment.  Among the conditions that must be met are the following:

1) the horse / equipment’s original use must begin with the taxpayer (i.e. horses that have not begun training; new equipment); and

2) the horse / equipment must be placed in service after September 8, 2010 and before January 1, 2012.

As many of the experts quoted in the Forbes article indicate, the Act does not provide an “easy write-off”. For starters, taxpayers wishing to avail themselves of the 100% bonus depreciation must be able to prove that they are in the “horse business” and that the property was purchased for said business. This element may pose difficulties to taxpayers who have not shown a profit in their horse business for many years. Further, purchasers of fractional interests in racing syndicates are generally considered “passive investors”, and therefore may not see any tax savings through application of the Act.

There are other considerations that come into play to determine whether the 100% depreciation is available, such as whether the taxpayer borrowed money to purchase the horse/equipment through an LLC or other entity. 

Horse businesses who purchased or will purchase new horses or equipment in 2011 should consult a CPA or attorney who has expertise in the equine industry to determine the possible applicability of the Act to their newly-acquired property.

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As a follow-up to last Thursday’s post, Tips for Equine Pre-Purchase Exams, the following is a guest post by veteran Kentucky equine lawyer, Joel B. Turner, with valuable information concerning pre-purchase exams and other steps buyers can take to protect their interests in a horse sale transaction.

"As a ‘horse lawyer’, people usually do not call me to tell me how happy they are with their newly- purchased horses.

One of the most common calls from potential new clients (i.e. the variety that is extremely unhappy and ready to litigate) involves the post purchase discovery of a serious soundness issue. Recently during one such call I rudely interrupted the caller to interject, "Excuse me, but let me guess which joint is causing your horse an issue?" My guess was correct and the caller was dumbfounded. While it was the first for her, the same sorts of issues crop up time after time in my world.

How do you protect yourself in a situation like this? 

a) Have a veterinarian, your veterinarian, perform a thorough pre-purchase examination; and

b) have an experienced lawyer prepare a contract to close the loopholes by obtaining proper warranties/ representations from the seller. 

The combination of these two steps should provide adequate protection from the possible deceptions that so often turn an excited purchaser of a new horse into a disgruntled, if not disillusioned, victim and caretaker of an unsound horse.

Top ten pre-purchase exam considerations:

1.            Is the vet performing the exam absolutely free from any conflict of interest or possible undue influence? Make sure the vet (and any vet who is a member or employee of his/her group or practice) has never performed any services for the seller. Do not, under any circumstances, ask the seller to refer you to a vet to perform the pre-purchase exam or consult about radiographs, ultrasound images, etc.

2.            Is the veterinarian performing the pre-purchase exam willing to promptly (within 24 hours) provide a written report of his findings and make all radiographs and scans available digitally for the potential purchaser to use to obtain a second opinion, if necessary?

3.            Is the veterinarian willing to review all the vet records obtained from the seller and watch the horse being ridden (preferably by the potential purchaser) as part of the pre-purchase evaluation for soundness/coordination-neurological issues?

4.            Does the vet know how much money you intend to pay for and the purpose for which you are purchasing the horse? Share the purchase price with the vet and ask the vet to assume you are buying the horse for resale; if you want the highest level of scrutiny and are willing to pay for it, this request will put the vet on notice of your intentions and encourage a much closer look.

5.            Is the seller willing to provide all veterinary records (including all medications dispensed, radiographs, ultrasounds or nuclear scintigraphy, i.e. "bone scans" performed) for the last 18 months to two years as well as any other "therapy" records such as acupuncture, massage, shock wave, hyperbaric chamber, etc. for review by you and your vet prior to the purchase decision?

6.            Is the seller prepared to represent that, at the time of the pre-purchase exam, the horse is not under the influence of any medication, is not being treated with any substance to address any past or present physical condition experienced by the horse and is willing to allow the veterinarian to take a blood sample for drug testing to verify the accuracy of this representation?

7.            Has the horse been examined by a vet in connection with a potential purchase within the last year?

8.            Is the seller willing to represent that the horse has not had any surgery or any intra articular injections of any substance (including without limitation, corticosteroids, blocking agents or hyaluronic acid) during the seller’s ownership, other than those disclosed by the seller, or if such surgeries or "joint’ injections have been performed upon the horse and are disclosed, is the seller willing to identify all of the dates when such procedures were performed and what substances were injected into which joints?

9.            Is the veterinarian willing (and capable) to effectively communicate to the potential buyer the significance of the findings and provide an opinion as to the functional effect of these findings in writing promptly after the examination is completed?

10.          Is the veterinarian sufficiently experienced with the particular type of riding that the potential purchaser intends to do and the kind of work that the horse has been doing, to provide the potential purchaser with a high level of confidence that the vet understands the amount and level of work the horse will have to perform to fulfill the buyer’s intended use?

This list is not exhaustive and does not address such issues as pre-purchase considerations for future breeding soundness of the horse. It is focused upon the veterinarian’s performance of the pre-purchase exam for a performance horse, and the seller’s willingness to make reasonable disclosures of the horse’s condition. This list has a particularly narrow focus on determining if there are any pre-existing issues that could lead to unsoundness making the horse incapable in the future of performing the tasks for which it is being purchased.

In this era when aggressive veterinary intervention with lameness issues, (particularly with the prevalent use of intra articular injections of corticosteroids), is far more common, latent defects in horses may be hidden even from the experienced examining vet, if proper due diligence is not performed in conjunction with the pre-purchase exam. The combination of a) the seller’s reasonable disclosures in response to the purchaser’s requests coupled with, b) representations and warranties in a written purchase agreement, and c) a thorough pre-purchase veterinary exam performed by an unbiased, qualified vet working exclusively for the potential purchaser, may afford the best opportunity to avoid the heartbreak and financial loss caused by a post purchase discovery of a latent, undisclosed and undetected condition suffered by a horse after the sale is final."

 © Joel B. Turner of Frost Brown Todd LLC 2011

About the Author:  Joel B. Turner is a Kentucky attorney practicing equine-related law for the last 27 years. For Joel’s full biography, click here.

Having a thorough pre-purchase veterinary examination done prior to a horse sale is one of the best ways parties to a horse sale can prevent disputes and lawsuits. 

Dr. Camille Knopf, an equine veterinarian in Northern California, offered some excellent advice this week on the blog Ribbons and Red Tape:

Always, always, always have a pre-purchase exam performed. Regardless of length of familiarity with the horse or seller, there should always be a thorough pre-purchase exam performed to provide you with a complete understanding of the health of the animal you are purchasing.

Always have a veterinarian pull and store blood at the time of pre-purchase exam. This blood can be stored for several weeks. If you purchase the animal and later suspect the horse may have been under the influence of a medication at time of exam, the serum can be analyzed for medication and may provide you with legal recourse if necessary.

Be cautious in purchasing any horse where the current owner wants to choose the veterinarian for pre-purchase exam, discourages you from having a pre-purchase exam, or discourages you from using a veterinarian of your choice. Reason: Sadly, the horse business is not immune to fraud and neither is the veterinary world. By choosing a veterinarian that does not have a direct relationship with the seller, you can protect yourself from a potentially biased opinion."

Here are some additional tips for pre-purchase exams that can go a long way to help prevent litigation:

1.     Buyers will often ask sellers for a referral if they do not know any veterinarians in the seller’s area. It’s not always a sign that something is amiss if a seller recommends a veterinarian with whom the seller has a business relationship, as long as the seller discloses the relationship to the buyer. If a buyer asks a seller for a referral, the seller can provide buyers a list of veterinarians in the seller’s area and allow the buyer to choose from the list. If the seller has a relationship with any of the clinics or veterinarians on the list, the seller should disclose that fact to the buyer.

2.     Generally, sellers should not allow a buyer to take a horse off the seller’s property for a pre-purchase examination. The seller or their agent, employee, or representative should be the one to haul the horse to the vet for the exam, if necessary. If the buyer chooses a veterinarian that is so far away that this becomes unduly burdensome for the seller, the parties should work out an agreement on who will pay the transportation costs.

3.     As the term "pre-purchase exam" implies, it should be done prior to the purchase!  That is, a pre-purchase exam should be performed before any of the following occurs: a) the buyer takes possession of the horse; b) the buyer pays the purchase price for the horse; and c) the buyer receives a bill of sale from the seller. A seller can take a down payment on the horse to either refund or apply towards the purchase price, depending on whether the pre-purchase exam results are satisfactory to the buyer. However, it is not advisable for a seller to hold a check for the full purchase price and agree not to cash it while the buyer is inspecting the horse.

4.     Sellers should always encourage every buyer to get a thorough pre-purchase exam and to inspect horses either in person or through an agent prior to the purchase or delivery of the horse. This thorough inspection protects the seller just as much as it does the buyer.

5.     If the seller purchased the horse from a third-party, the buyer should ask the seller if the seller had a pre-purchase exam performed prior to the seller’s purchase.  If the answer is yes, the buyer should ask the seller for a copy of the results of that exam.  

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Some horse breeders, trainers, and consignors who are in the business of selling horses advertise “exchange policies” on their websites. The typical exchange policy contains language promising that a buyer can exchange a horse purchased from the seller for another horse owned by the seller of the same or lesser value within ___ days of the sale. Posting an exchange policy of this nature on the Internet is not a good idea, in my opinion.

Don’t get me wrong–good customer service is paramount to a seller’s reputation. Sellers can surely offer a buyer an exchange horse if a particular situation warrants it and a suitable exchange horse is available. But so much can go wrong if a seller offers each and every buyer the “right” to exchange a purchased horse. For instance:

1)         Some buyers do not get a pre-purchase exam. Even for buyers who do get a pre-purchase exam, they do not check for every malady, disease, or infirmity due to the expense involved. This is problematic when an exchange has been offered. It can be very difficult to tell whether the horse is returned in the same or better condition as when he left the seller’s property.

2)         Exchange policies may work great for retailers where there is price tag on each item in the store and the same items can be found on-line or in other stores. But establishing the value of the exchange horse can be difficult. The seller’s asking price is not always the horse’s fair market value. Reasonable minds can differ as to the value of a horse. Even professional equine appraisers may disagree. 

3)         A seller may not have an exchange horse that possesses all the same qualities as the original horse within the stated time frame. This leads to a lot of confusion. Does the buyer have to keep the horse until the seller obtains a suitable replacement? Does the seller have to keep and feed the buyer’s horse until a suitable replacement has been obtained by the seller? How long will it take the seller to find a suitable replacement?

4)         If a buyer thinks he can simply return the horse for an exchange after 30 days if it doesn’t work out, he may be encouraged to purchase a horse without first inspecting it or spending the money to have a thorough veterinary examination done. This is problematic for several reasons. First, as discussed above, a seller who has offered an exchange policy cannot establish that the horse is being returned in the same condition if no thorough pre-purchase exam was done. Further, a buyer may come back to seller after the exchange policy has expired and demand a refund or exchange because the horse has a soundness or health issue. The presence or absence of a pre-existing condition is then hard to prove because no pre-purchase examination was done.

Due to all of these issues, an exchange policy on horses cannot function as simply as a similar policy offered on household goods sold by Home Depot, Target, and other retailers. Instead of offering a blanket exchange policy on the Internet, sellers should take an “all sales are final” approach and encourage all buyers to get a thorough pre-purchase exam and to inspect the horse prior to purchase in person or via an agent. Taking this approach does not prevent sellers from providing an exchange horse after the fact where the circumstances warrant it. 

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Oktoberfest came to an end in Germany this Monday, October 3.  But in Texas, you can still find some places to celebrate Oktoberfest this weekend and later this fall!  To kick off your celebration, here is an overview of the current state of German law as it relates to horse sales by German lawyer Nikolaus Fackler.  In the spirit of Oktoberfest, this post is even being provided to you in both English and German, for your reading pleasure.  Prost!

 

Photo:  Flag of Lower Saxony, Germany [Niedersachsen]

“Before January 1, 2002, die Gewährsmängel (the “minimum warranties”) applied to the purchase and sale of livestock under German law. Pursuant to die Gewährsmängel, a buyer could rescind a sale if a buyer discovered the following vices or diseases in a horse within a certain time frame:

  1. Dummkoller (spinal ataxia)
  2. Periodische Augenentzündung (moon blindness)
  3. Rotz (glanders)
  4. Kehlkopfpfeifen (roaring / laryngeal hemiplegia)
  5. Koppen (cribbing)
  6. Dämpfigkeit (heaves / COPD)

The statute containing the Gewährsmängel was found in Sections 481-492 of the old version of the German Civil Code (Bürgerliches Gesetzbuch or “BGB”) and the “Imperial Ordinance Concerning the Main Defects and Warranty Periods in the Sale of Livestock” (27 March 1899).

Die Gewährsmängel were abolished on January 1, 2002, when the German “law of obligation” changed as part of the required harmonization of German law with European Union legislation. 

As of January 1, 2002, German law relating to the sale of livestock is the same law that applies to the sale of goods, in general.  The following rules now apply in Germany to the sale of all goods, including horses:

  1. A good is free from warranty defects if it possesses the represented qualities.
  2. If no qualities were represented, a good is free from warranty defects if it is acceptable for  general use.

These current rules are found in Section 434 of the BGB (i.e. Sachmangel), which can be downloaded here. 

If a horse, for example, is sold as a show horse, it must be suitable for use as a show horse. If no qualities are represented, however, a horse must only be acceptable for general use.

This change in the law doesn’t mean we should completely forget about the old Gewährsmängel, though. Most regional superior courts in Germany would still likely find that cribbing, for example, is an abnormal behavior and an expression of a mental defect. Therefore, most German courts would find that a cribber is not acceptable for general use. This uncertainty under current German law illustrates the point that it is more important than ever to get all horse sales contracts in writing and to set forth all applicable warranties [or lack thereof] in said contract."

Gewährsmängel beim Pferdekauf:

“Das Kaufvertragsrecht hat sich in Deutschland im Jahr 2002 grundlegend geändert. Seit der Schuldrechtsreform im Jahr 2002 gibt es keine speziellen Regeln mehr für den Pferdekauf. Insbesondere wurden die speziellen Gewährsmängel im Pferdekaufrecht abgeschafft.

Foto: Rechtsanwalt Nikolaus Fackler

Seit 2002 ist die Sachmängelhaftung für alle Gebrauchsgüter gleich. Es gibt keine unterschiedlichen Regeln für den Handel mit Pferden und lebenden Tieren oder, beispielsweise, für den Handel mit Autos oder anderen Waren. 

Für alle Handelsgüter, also auch für den Handel mit Pferden, gelten folgende Regeln:

1. Die Handelsware ist frei von Mängeln, wenn sie die vereinbarte Beschaffenheit hat.

2. Wenn keine Beschaffenheit vereinbart wurde, ist die Handelsware frei von Mängeln, wenn sie für die nach dem Vertrag vorausgesetzte Verwendung geeignet ist oder wenn sie für die gewöhnliche Verwendung geeignet ist.

Wenn beispielsweise ein Pferd als Turnierpferd verkauft wird, muss es auch als Turnierpferd geeignet sein. Wenn im Vertrag keine Beschaffenheit vereinbart wurde, muss es lediglich zum generellen Gebrauch geeignet sein.

Nach den Entscheidungen der meisten deutschen Oberlandesgerichte ist Cribbing (also Koppen) eine echte Verhaltensstörung mit Krankheitswert und Ausdruck eines psychischen Defekts des Pferdes. Deshalb sind solche Pferde für den generellen Gebrauch nicht geeignet. Das Schuldrecht in Deutschland ist also seit 2002 komplizierter und – im Bezug auf das Pferderecht – unübersichtlicher geworden.”

About Nikolaus Fackler: Nikolaus “Nick” Fackler is an attorney in Augsburg, Germany with over 30 years’ experience. His areas of expertise include equine law, criminal law, and commercial law. For more information, see Nick’s full biography.

For more information, see this related post:  Miminum Warranties Applicable to Horse Sales in the European Union

[Intro and "About" authored by Alison Rowe.  English substantive text authored by Nikolaus Fackler and edited by Alison Rowe; German text authored exclusively by Nikolaus Fackler]