Equine Law Blog

Perils of the Verbal Contract

“Get it in writing!”  No matter how often lawyers utter these cautionary words,  people in the horse industry continue to do business on a handshake.  Unfortunately, legal disputes involving verbal agreements are rarely quick, easy, or cheap to resolve.  Why? 

With nothing in writing, each party to the transaction often has a totally different understanding of what it involved.  As a result, it sometimes takes a lengthy lawsuit to prove the contract’s terms. 

Those who fail or refuse to use written agreements accept the risk that any number of problems can occur.  Here are some of them:

• Unenforceability.  By law, a verbal contract might be unenforceable, depending on its terms.  This actually happened in an equine case from New York several years ago.  In that case, a court refused to enforce a verbal broodmare lease because the contract could not, by its terms, be performed within a year; that agreement violated a common legal principle known as the “Statute of Frauds,” which generally provides that certain types of contracts must be in writing to be enforceable.  For example, the Statute of Frauds provides that contracts that cannot, by their terms, be performed within a year must be in writing.  Also, the Statute of Frauds requires conveyances of land to be in writing.
• Equine Liability Statutes.  Currently (as of July 2011), 46 states have some type of equine activity liability statute on the books.  Some of these laws require the use of written contracts.  Arizona’s equine activity liability act, for example, provides no protection unless the equine activity participant has signed a written waiver that includes specific language supplied in the law.  Similarly, West Virginia’s Equestrian Activities Responsibility Act requires participants to sign a written statement using language that the law provides.  In a small number of states, equine activity liability statutes will give no protection for “equine activity professionals” or “equine activity sponsors” that do not include the law’s “warning” language or other language within written contracts.
• Costs.  Lawyers charge far more to resolve legal disputes than they do to prevent them.  Consequently, the legal expense to draft a written contract (that can help avoid a dispute) is often a small fraction of the fee if a legal dispute arises from the transaction.

Conclusion

This article is not meant to suggest that every written contract will prevent all disputes.  Sometimes even the most sophisticated contracts can generate disputes.  To their credit, however, written contracts can help narrow the grounds of a dispute.  And the net result is often a savings of time, money, and aggravation.

If you would like more information or have any questions, please give me a call.

Categories: Contracts, Liability, Sales/Disputes