Right of First Refusal - Unfit Seller Question

[jamm_njockey]

I bought a horse about 1 year ago that came with a Right of First Refusal/Buy Back Contract. I will start out saying I keep horses for life and never plan to sell him. For the sake of discussion I want to ask this question. Is a buy back contract/ROFR binding if the seller is unfit to care for the animal?

DETAILS:
I bought this horse from a girl (referring to her as Seller) where I boarded my 2 other horses at the time. The Seller desperately needed money and couldn’t afford to feed the other 5 horses she owned. We bought him and she made us sign the contract. Which was fine he needed to be in the care of someone who could afford his care.

The original owner (referring to as Breeder) who had bred the horse and sold to the Seller 2 months after he dropped on the ground also had a buy back contract with the Seller. The Breeder had turned down the option to buy back, but still showed up and caused a scene during our transaction. The Breeder was in the same situation as the Seller in not being able to afford him and her other horses.

SO… by the time the transaction was over both the Breeder and Seller were on the buy back contract which is fine I never plan to sell him. I do understand things come up like death and injury, but my father has a 50 acre farm where all my horses (4 horses) are at now and has the means to take care of them. The horse was very malnourished and underweight. It took a lot to get him to where he needed to be.

Hypothetical Sell question now and AGAIN I AM NOT GOING TO SELL HIM IT’S JUST FOR DISCUSSION:

How could I ethically and with good judgment offer him back to them? I know they are unfit to care for him and saw this first hand. If they bought him back I would be sending him into a horrible situation. ALSO, I understand circumstances for people can change, but I would be relying on things I have seen with my own eyes.

Lets hear what you have to say! Lets discuss away.

AGAIN! I DON’T WANT TO SELL HIM THIS IS PURELY JUST FOR DISCUSSION AND MAYBE SOMEONE ELSE IS IN THIS POSITION AS WELL.

[Simkie]

Buy back clauses don’t usually set price.

A very easy way to not have this horse go back to the previous owner or breeder in your hypothetical situation is to increase his value through training etc so that if you WERE to sell him, his previous people would in no way be able to afford him.

[jamm_njockey]

@Simkie I intend for him to be trained well and his price would definitely go up. The price seems like it would be the saving grace in things like this.

Thank you for your input!

[SuzieQNutter]

It obviously doesn’t work as the breeder had one and made a stink and still did not get the horse.

[Jenerationx]

If they couldn’t afford to feed him, they probably won’t be able to afford his price in the future when he’s trained. I wouldn’t worry about it.

[Guilherme]

@jamm'njockey

I bought a horse about 1 year ago that came with a Right of First Refusal/Buy Back Contract. I will start out saying I keep horses for life and never plan to sell him. For the sake of discussion I want to ask this question. Is a buy back contract/ROFR binding if the seller is unfit to care for the animal?

You have two different things, here.

A “Buy Back Agreement” means that the Seller has retrained a right to repurchase the horse under some circumstance. If that comes to pass then you would have to sell the horse back to them. I presume the Contract will sets forth the circumstances, procedures, and price. If not, the Seller has a BIG PROBLEM if you want to fight them.

The “Right of First Refusal” means that IF you ever decided to sell then you must give such notice as the Contract requires and follow the procedures set forth.

The reality is that these clauses ARE enforceable. The remedy for the holder of the right would be to sue for an order of specific performance directing the return of the animal upon payment of the contract price.

If you refuse to follow the Contract based upon some alleged “unfitness” to own then you would have to plead and prove your allegations.

DETAILS:
I bought this horse from a girl (referring to her as Seller) where I boarded my 2 other horses at the time. The Seller desperately needed money and couldn’t afford to feed the other 5 horses she owned. We bought him and she made us sign the contract. Which was fine he needed to be in the care of someone who could afford his care.

The original owner (referring to as Breeder) who had bred the horse and sold to the Seller 2 months after he dropped on the ground also had a buy back contract with the Seller. The Breeder had turned down the option to buy back, but still showed up and caused a scene during our transaction. The Breeder was in the same situation as the Seller in not being able to afford him and her other horses.

SO… by the time the transaction was over both the Breeder and Seller were on the buy back contract which is fine I never plan to sell him. I do understand things come up like death and injury, but my father has a 50 acre farm where all my horses (4 horses) are at now and has the means to take care of them. The horse was very malnourished and underweight. It took a lot to get him to where he needed to be.

You bought from the Seller, not the Breeder. The Breeder is a stranger to your transaction. You ARE in Priority of Contract with the Seller. The Seller has every right to demand you comply with the Contract; the Breeder does not. If the Seller breached an agreement with Breeder then that is NOT your affair and you are NOT bound by any agreement they might make between them. You may safely tell the Breeder to “butt out” of any discussion you have with the Seller.

The Seller might sell their interest (the Buy Back or the Right of First Refusal) to the Breeder and that means the Breeder can “step into the Seller’s shoes.” If this is a registered horse then if the Breeder still holds the papers then they may have a right to make a demand on the Buyer if the Buyer wants the papers. Beyond that, I’m not sure what interest the Breeder might have.

Hypothetical Sell question now and AGAIN I AM NOT GOING TO SELL HIM IT’S JUST FOR DISCUSSION:

How could I ethically and with good judgment offer him back to them? I know they are unfit to care for him and saw this first hand. If they bought him back I would be sending him into a horrible situation. ALSO, I understand circumstances for people can change, but I would be relying on things I have seen with my own eyes.

Lets hear what you have to say! Lets discuss away.

AGAIN! I DON’T WANT TO SELL HIM THIS IS PURELY JUST FOR DISCUSSION AND MAYBE SOMEONE ELSE IS IN THIS POSITION AS WELL.

I have NEVER put either of these issues in a contract of sale and would NEVER agree to them as a buyer as life is way too short get tied up in these kind of knots.

I’m also accepting that this is a genuine request not one of the “First Poster Dramatic Plays” that sometimes raise their curtain, here.

Everything I’ve said, above, is in the nature of general Contract Law and there may be exceptions or differences where you live. Consult a local attorney for local answers.

G.

[jamm_njockey]

@SuzieQNutter The breeder told the seller she didn’t want to buy him back which allowed me to buy him, but she still showed up and was very nasty about it.
@Jenerationx (love the username!) I am not going to worry about it just letting it blow in the wind. He is home for his lifetime now.
@Guilherme It states that if I can’t take care of him and want to sell him I have to offer to the Seller first then the breeder and if they say no I can then sell him to whom ever I want. Like I said they couldn’t afford to take care of him in the first place. The horse is unregistered and I have a bill of sale. I genuinely just wanted to have a discussion about this for my education. Yes, this is my first post, but I had been researching this kind of information all morning. I decided to join COTH to reach out to people who could provide me with information and personal experiences.

[WildLittleWren]

Well COTH is definitely the place to come for advice. You have gotten some good feedback so far. I would go a step further and say that if they can’t afford to buy him back (at what you would “offer” him to them for, whatever price you set/market value), do you really think they are going to pony up the costs to go to court?

It seems to be a nonissue in this circumstance. I have never signed a first right to buy back on a horse I have purchased, but I HAVE given a verbal agreement to contact them first if I can’t keep the horse. And I do. If the seller wasn’t taking proper care of the horse when I decided to purchase, and I felt that it was not a situation I would want to put that horse back in, I would NEVER offer a verbal agreement to it. And if asked directly, while I may not come right out and be rude when I’m trying to purchase the horse and say he’s getting crud care, I will say I’m not interested in a buy back clause. Then the seller has the right and freedom to not sell to me, with all the cards out on the table. A lot of people don’t honor their word, but I make it a point to each and every time.

I know you’ve already purchased him so it’s already a moot point, but just for future ideas of how to handle a situation like that. Does the written contract state a price that you have to offer him back at if you decide to sell? Some people will require a set price. If yours doesn’t, technically you can offer him at whatever price you think might be a bit too high for him at that point. But if you ended up selling the horse for a ton less, that would be an interesting conversation if they found out…

I have heard several times that horses are considered property. That the courts can’t enforce you ti give back the horse, but can set a judgement for a certain amount to the seller for breaching the contract. Some contracts will state that if you sell the horse and breach the contract, that you must pay x amount of dollars.

I am always super careful about what I sign. It sounds like these two characters may have bullied you around a bit. That’s not cool, but you have to speak up. Good luck OP. Hopefully you never have to sell him and it’s a nonissue.

[jamm_njockey]

@WildLittleWren thank you for your feedback. I appreciate it. Everything was fine until the breeder came to make a scene at that point I just wanted to get it over with. I actually pulled the hand written contract out and reread it when I got home from work. The Seller wrote Buyer in every spot that needed to say seller. Which I didn’t even catch when she wrote it out. I had moved to the north for a job when I bought him then got a different job in my home state and moved everyone home after that. The breeder and seller definitely don’t bother me, and I don’t bother them because I’m not going to sell him haha.

[Libby2563]

@WildLittleWren

I have heard several times that horses are considered property. That the courts can’t enforce you ti give back the horse, but can set a judgement for a certain amount to the seller for breaching the contract.

This is not true. A court could order you to sell a horse (like other property) back as required by a contract. I doubt they would care if you thought the seller was unfit. It’s a remedy called “specific performance,” as Guilherme mentioned in his post. No idea if it would actually happen in this case obviously, without knowing more details, and yes the seller would have to go through a lawsuit, which seems improbable, luckily for OP.

@WildLittleWren

Some contracts will state that if you sell the horse and breach the contract, that you must pay x amount of dollars.

This is true! When the damages are specified in the contract they’re called “liquidated damages.” It may not be enforced if the amount is punitive.

[ladyj79]

Meh, I wonder if anyone has ever taken this to court to try to enforce a buy back agreement. Hypothetical, who knows, but I’m getting old and have never heard of anyone who took a seller to court to enforce a buy back clause, nor have a heard of a court enforcing a horsey buy back clause. Not saying it has never happened, but it feels very mythical, like so many beliefs in the horse industry.

[clanter]

a first right of of refusal clause has to be supported by consideration it just can not be added to the contract (but I never have sign a contract that included such a clause nor would I ever)

There are just too many good horses available

[Equisis]

Honestly, OP, I wouldn’t stress about it. I talked this over with a friend of mine who is in equine law (which varies by state!) and was advised that in most cases, it is not enforceable. Horses are property. Once you sell that property, you pretty much give up any rights.

I put a “ROFR” clause in the contract when I sell horses. I am upfront with my buyers that I don’t intend to get in the way of them selling these horses if they choose; my intent is to stay “in the loop” so I can help facilitate a soft landing for these horses if needed. I like all of these horses, and I would offer a landing to any of them if the buyer was in trouble and I had the capacity. I have zero interest in interfering with their personal affairs, nor with their right (as owners) to sell the horse to whomever they choose at whatever price they deem appropriate.

[OverandOnward]

It’s an interesting theoretical legal question.

And then there is reality, which is what really happens. I have heard of so many sales contracts with those clauses, and they were almost never complied with, with no consequences. For whatever reason people tend to sell onwards without notifying the previous owner, in spite of such a clause and a possible quick sale to that individual. And the original seller may or may not hear of it, but if they do know, nothing legal is ever done.

One sticky point is that the price is rarely set in those clauses and that makes them virtually unworkable. The horse is probably worth a lot more or a lot less than that original sale. But how is price decided? Never heard of a contract that addressed that.

Also, when a buyer decides to sell but has such a clause in the contract they used to buy the horse, the buyer rarely knows how to notify the original seller without getting hung up forever waiting on that individual to make up their mind whether to buy back, or not. They don’t know how to send a letter that has specific dates set forth for performance, after which the horse goes up for sale to others.

And at the end of it all, when the original seller finally learns that the horse was sold again and they were never contacted, what are they going to do to enforce the clause? Most are not an attorney who knows how to do it for themselves, it will cost them money to initiate something through the courts (maybe more than the value of the horse), and there is no controlling what the outcome will be. Depending on if it drags out in court, there may be more expenses to see it through. And in the end, no matter how certain people are that they know the right outcome, judges do whatever they think they should do, without regard to anyone else’s opinion.

So, my speculation is that, in real life, you could sell the horse to anyone you wanted to, and nothing more would happen about it from the seller you bought from, other than some possible nasty words. Even if they could, they are unlikely to take court action.

[asb_own_me]

Unenforceable. Don’t give it another thought.

[Guilherme]

@OverandOnward

It’s an interesting theoretical legal question.

And then there is reality, which is what really happens. I have heard of so many sales contracts with those clauses, and they were almost never complied with, with no consequences. For whatever reason people tend to sell onwards without notifying the previous owner, in spite of such a clause and a possible quick sale to that individual. And the original seller may or may not hear of it, but if they do know, nothing legal is ever done.

One sticky point is that the price is rarely set in those clauses and that makes them virtually unworkable. The horse is probably worth a lot more or a lot less than that original sale. But how is price decided? Never heard of a contract that addressed that.

Also, when a buyer decides to sell but has such a clause in the contract they used to buy the horse, the buyer rarely knows how to notify the original seller without getting hung up forever waiting on that individual to make up their mind whether to buy back, or not. They don’t know how to send a letter that has specific dates set forth for performance, after which the horse goes up for sale to others.

And at the end of it all, when the original seller finally learns that the horse was sold again and they were never contacted, what are they going to do to enforce the clause? Most are not an attorney who knows how to do it for themselves, it will cost them money to initiate something through the courts (maybe more than the value of the horse), and there is no controlling what the outcome will be. Depending on if it drags out in court, there may be more expenses to see it through. And in the end, no matter how certain people are that they know the right outcome, judges do whatever they think they should do, without regard to anyone else’s opinion.

So, my speculation is that, in real life, you could sell the horse to anyone you wanted to, and nothing more would happen about it from the seller you bought from, other than some possible nasty words. Even if they could, they are unlikely to take court action.

The reason why these clauses are functionally unenforceable is that the mechanism of enforcement is suit in civil court. Contract cases are seldom candidates for contingent fees (the way Tort cases are) because Contract damages are pretty much limited to provable financial loss and emotional distress or other “personal” circumstances are not available.

In class action contract cases the rules change some because now you are dealing with Real Money and it’s worth the time of a firm to both prosecute and defend a claim.

Put another way, when millions are on the table the spending of tens or thousands is justified.

G.

[tabula_rashah]

Other than rescues does anyone actually know first hand about a case that went to court of first right of refusal?
I totally wouldn’t worry about it. The few horses that I have sold, I’ve told the people that I would buy back at the amount the horse was sold to them for at anytime but I’ve never made any type of contract because I fully understand that once the horse is sold, it’s not mine anymore

[PeteyPie]

@clanter

a first right of of refusal clause has to be supported by consideration it just can not be added to the contract (but I never have sign a contract that included such a clause nor would I ever)

There are just too many good horses available

Just to elaborate on this, and please correct me if I’m wrong because I am not an attorney: “consideration” means a tangible thing, usually, money, which is exchanged for something else. In this case, the breeder did not receive consideration and did not give you consideration either. The breeder did not receive money from you, you paid the seller. What the seller did with the money is a separate issue. Also, the breeder did not sell you the horse, the seller did.

So you received a horse from the seller, the seller received money from you, and the breeder’s name was stuck in the contract with no consideration on his part. A contract is not considered legal or binding as far as I understand it, unless consideration is received. So the breeder is out of the picture because his/her position in that contract has no basis.

Edit to add: if the contract stated that money was being paid to the breeder, how would that complicate matters, since the breeder didn’t own the horse? It seems to me it would still be null because the breeder is not giving anything. Does that seem right? They can’t sell something they don’t own.

[OverandOnward]

@Guilherme

The reason why these clauses are functionally unenforceable is that the mechanism of enforcement is suit in civil court. …

Response not @ G. who already knows more about this than most of COTH … but in general …

There are people who are unfamiliar with the court side of contracts, who seem to believe that there are some sort of Contract Police who go around writing tickets (or something) every time someone violates a contract clause. Who will right wrongs, hold others accountable, and dispense a little justice. Like law enforcement on television.

There aren’t any Contract Police. No one has the job of general contract oversight. And judges do not all follow narrow standards of decision-making - the judge can be a completely random factor.

Contracts exist in a completely separate world than does the kind of law enforcement we see on television - a murky world. Many people who are party to a contract just ignore it, or deliberately violate it, or ignorantly trample all over the agreed terms, and not a thing happens to correct them or the situation.Unless another party to the contract has the means and the motivation to take some kind of action.

Sometimes the kindest and most responsible thing an attorney can do is explain to their client that accountability will be expensive and probably pointless, and it is best to let it go and move on with life.

Accountability for contracts has to be pursued by the individual who wants it. And that individual has to put up their own money to start the process and work through it. And there is no guarantee of an outcome, judges do whatever judges do.

Not suggesting that people ignore contracts they agreed and signed. That would be against living with integrity. But would definitely advise to keep it in perspective. How much is at stake financially, how much impact on people’s lives. If the answer to both is “not much”, don’t give it more importance than it deserves.

And when considering pursing a contract issue, or if you’re wondering if someone else is going to proceed against you, remember that $250/hour would be a very inexpensive attorney. Start some legal papers going back and forth, and the meter is always running.

When you hear of some legal dust-up, and then later you’re wondering “whatever became of that? who won?” More likely one or both sides ran out of the money and time to keep it going. I can think of a few in the horse world right now that are doubtless in that status.

[jamm_njockey]

Libby2563 , ladyj79 , clanter , Equisis , OverandOnward , asb_own_me , tabula rashah , PeteyPie Thank you!