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New Kentucky Law Requires Written Consent When Buying/Selling Horses



by Sadie Fowler

            The Kentucky General Assembly has passed a new state law that requires written bills of sales and full disclosure of commissions in horse sales exceeding $10,000. The law came as a result of a law suit filed within the race horse industry, but the show horse industry will be affected as well.

            The passing of such a law came about after a milestone lawsuit was filed by race horse owner Jess Jackson, a billionaire California winemaker. According to the Lexington Herald-Leader, in the suit Jackson claimed “that he was defrauded by bloodstock agents and others who charged secret commissions when Jackson bought horses and horse farms in Kentucky.”

            “This was not a law that was put forward because of the show horse industry,” said Fred Sarver, on behalf of the American Saddlebred Horse Association, acknowledging that show horse trainers/agents are well deserving of their commissions. “This came about because of race horses. I think if it affects the horse industry at all it will be in a positive way because it brings integrity and confidence to doing business in Kentucky…This law passed by an overwhelming majority.”

Jeff Streepey, legal representative for the American Saddlebred Association, said one of the big issues was agents and/or trainers not disclosing that they represented both sides of the deal, perhaps earning commissions from both sides. Getting the specifics of a deal down on paper should also be of utmost importance to horse buyers and sellers, he said.

“Written consent is long overdue,” he said.

“‘Don’t just shake hands with a guy in a bar – get it in writing. What he’s going to do for you and what he’s not going to do,’” said Keenland President Nick Nicholson in an article published in the Lexington Herald Leader. He continued, ‘“The level of integrity in the horse industry is as high as in any other business, although many deals are made in the barn or a box at a racetrack instead of in the boardroom.’”

While a large portion of show horse sales are conducted in Kentucky, the question arises, what if a person outside the State of Kentucky purchases or sells a horse to a Kentucky resident? According to Streepey, “The extraterritorial effect of this law is problematical,” said Streepey. “It depends on the circumstances of [each individual] deal and would have to be determined by the court.

The new law will take effect July 15, 2006 and a full, unofficial copy of the law follows:

AN ACT relating to the sales of horses.

Be it enacted by the General Assembly of the Commonwealth of Kentucky:

SECTION 1: A NEW SECTION OF KRS CHAPTER 230 IS CREATED TO READ AS FOLLOWS:

(1)   Any sale, purchase or transfer of an equine used for racing or showing including prospective racehorses, breeding prospects, stallions, stallion seasons, broodmares, or weanlings, or any interest therein, shall be:

(a)    Accompanied by a written bill of sale or acknowledgement of purchase and security agreement setting forth the purchase price; and

(b)   Signed by both the purchaser and the seller or their duly authorized agent, or in a transaction solely relating to a season or fractional interest in the stallion, signed by the syndicate manager or stallion manager.

(2)   In circumstances where a transaction described in subsection (1) is accomplished through a public auction the bill of sale requirement described in subsection (1) may be satisfied by the issuance of an auction receipt, generated by the auction house, and signed by the purchaser or the purchaser’s duly authorized agent. An agent who signs an auction receipt on behalf of his or her principal shall do so only if authorized in writing. When presented with such authorization, all other parties to the transaction may presume that an agent signing on behalf of his or her principal is duly authorized to act for the principal.

(3)   It shall be unlawful for any person to act as an agent for both the purchaser and the seller, which is hereby defined as a dual agent, in a transaction involving the sale, purchase, or transfer of an interest in an equine used for racing or showing, including prospective racehorses, breeding prospects, stallions, stallions seasons, broodmares, or weanlings, or any interest therein, without:

(a)    The prior knowledge of both the purchaser and the seller; and

(b)   Written consent of both the purchaser and the seller.

(4)   It shall be unlawful for a person acting as an agent for either a purchaser or a seller or acting as a dual agent in a transaction involving the sale, purchase or transfer of an equine used for racing or showing, including prospective racehorses, breeding prospects, stallions, stallion seasons, broodmares, or weanlings, or any interest therein, to receive compensation, fees, a gratuity, or any other item of value in excess of five hundred dollars ($500), and related directly or indirectly to such transaction, from an individual or entity including any consigner involved in the transaction, other than an agent’s principal, unless:

(a)    The agent receiving and the person or entity making the payment disclose in writing the payment to both the purchaser and seller; and

(b)   Each principal for whom the agent is acting consents in writing to the payment.

(5)   Any person acting as an agent for a purchaser or seller or acting as a dual agent in a transaction involving the sale, purchase, or transfer of and equine used for racing or showing, including prospective racehorses, breeding prospects, stallions, stallion seasons, broodmares, or weanlings, or any interest therein, shall, upon request by his or her principal or principals, furnish copies of all financial records and financial documents in the possession or control of the agent pertaining to the transaction to the transaction to the principal or principals. However, disclosure of compensation arrangements described in subsection 97) of this section shall not be required. For purposes of this subsection, financial records shall not include the agent’s or owner’s work product used to internally evaluate the equine.

(6)   Any person injured by a violation of this section shall recover treble damages, from persons or entities violating this section, and the prevailing party in any litigation under this section shall be entitled to an award of costs of the suit, reasonable litigation expenses, and attorney’s fees. As used in this section, treble damages shall equal three (3) times the sum of:

(a)    The difference, if any, between the price paid for the equine and the actual value of the equine at the time of sale; and

(b)   Any payment made in violation of subsection (4) of this section.

(7)   Nothing in this section shall require disclosure of compensation arrangements between a principal and an agent where no dual agency exists, where the agent is acting solely for the benefit of his or her principal, and where the agent is being compensated solely by his or her principal.

(8)   Notwithstanding any provision of the Kentucky Revised Statutes to the contrary, for transactions contemplated by this section that are accomplished through a public auction, this section shall not require disclosure of the reserves, the identity of the principals, or the auctioneer’s commissions. Auction companies shall not be deemed to be dual agents for all purposes under this section.

(9)   The provisions of this section shall not apply to the sale, purchase, or transfer of an equine used for showing if the sale, purchase, or transfer does not exceed ten thousand dollars ($10,000).

(10)           No person shall be held liable under this section unless that person has actual knowledge of the conduct constituting a violation of this section.

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