ARE YOUR CONTRACTS FINE-TUNED?

Part One of a Two Part Series

Do you really believe that you have the "perfect" contracts for your equine activities? Do you believe that your contracts adequately account for the unique requirements of your state's law? The following is a general review of ten details to consider in an effort to "fine-tune" a variety of contracts used in equine-related businesses and activities.

Please keep in mind that this article does not provide legal advice; legal advice is given in an attorney-client relationship when an attorney receives specific facts.

Detail #1 - Indemnification Language
Few equine contracts include provisions for indemnification. Indemnification is a fine point that merits consideration in a wide variety of equine-related contracts.

What is indemnification? In its most basic sense, indemnification is an arrangement in which someone agrees to compensate another for an anticipated loss or liability. As an example, an indemnification provision between parties A and B can provide: if there is loss or liability asserted against A due to the acts of B, then B will pay any legal fees, liabilities, or judgments that others may assert against A.

Indemnification provisions (where allowed by law) can be appropriate in equine leases, breeding contracts, boarding contracts, contracts for the sale of a horse on installment payments, and many others. An equine lease contract, for example, is an excellent opportunity to include indemnification language because the one who parts with the horse (the lessor) runs the risk of being named in a liability lawsuit if the leased horse injures someone. An indemnification provision would require the lessee to protect the lessor in this type of situation.

Detail #2 - Equine Activity Liability Act Language
As of August 1997, 39 states across the country have passed laws that somehow affect liabilities in their horse industries. Approximately 27 of these laws have language that affects equine-related contracts or releases in those states. In particular, many of the laws require repeated warning language or including other language in contracts. Indiana's equine liability law, for example, requires inclusion of the following language:

WARNING

Under Indiana law, an equine professional is not liable for an injury to, or the death of, a participant in equine activities resulting from the inherent risks of equine activities.

Consequently, adhering to these legal requirements is an important fine point to be considered for a variety of equine-related contracts including releases, breeding, boarding, riding instruction, saddle and harness rental, and others.

Detail #3 - Addressing, When Appropriate, Alternative Means of Resolving Disputes
Resolving legal disputes through the court system can be time-consuming and very costly. Alternative methods of dispute resolution have become popular because they are generally considered to be quicker and cheaper than the court system. These factors alone make it important to consider contract language that preserves the right to resolve certain matters through binding arbitration or through other alternative means of dispute resolution.

Arbitration is a common alternative method of resolving legal disputes. In an arbitration, the parties agree to have up to three neutral persons, such as a lawyer, retired judge, or company providing alternative dispute resolution services, listen to both sides of a case, hear key witnesses, examine important documents, and then render a decision. The parties to the dispute must agree that the arbitrator's decision shall be valid and binding. In most types of arbitration, a lawyer can handle your case for you. Other types of arbitration involve the parties themselves and their witnesses but no attorneys.

Arbitration is not suitable for every type of legal dispute, however. Some disputes are better left for resolution through the court system, such as disputes involving the payment of money, foreclosing on stablemen's liens, disputes over who can retain possession of a horse involved in a transaction, and others.

Detail #4 - Language Eliminating Verbal Modifications to the Contract
Another fine point of a good equine contract is language designed to prevent a party from asserting that the contract was changed through a verbal understanding that was reached either before or after the contract was signed. These assertions defeat the purpose of having a written contract evidence the parties' understanding in a transaction. To prevent this problem, the contract can include language stating:

• The contract is the complete expression of the parties;
• The contract replaces any prior understandings between the parties; and/or
• The contract can only be modified in a written agreement that has been signed by both parties.

Detail #5 - Authorization by a Corporate Party to Execute the Contract
In some contracts, such as breeding, boarding, sales, or property leases, one of the parties to the contract might be a corporation. If you are doing business with a corporation, how can you be sure that you are dealing with someone who is truly authorized to act on behalf of the corporation? Generally speaking, the law imposes on you the duty to make sure that the person who signed the contract on behalf of the corporation has proper authority.

If you are doing business with someone purporting to represent a corporation, you can protect yourself with language in the contract stating that the one signing on behalf of the corporation ha actual authority to bind the corporation and/or has received proper authorization from the corporation to sign the contract and enter into the transaction at issue.

Part II of this series will cover five more provisions to consider when fine-tuning an equine-related contract. This article does not constitute legal advice. When questions arise based on specific situations, consult with a knowledgeable attorney.

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