You can be a bloodstock agent too!

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Whether it’s millions of dollars of Thoroughbred horseflesh or a $500 weekend hack, be aware of your responsibilities when buying a horse for somebody else. George Fraser takes us through your legal obligations when acting as an agent in the sale of a horse.

 

If you buy or sell horses for others, or advise on the purchase or sale of stallion nominations, the scary news is, it could be you, and you will have some legal responsibilities to fulfill.

If you go to nearly any sale at either William Inglis or Magic Millions you will see the usual cast of characters that are the professional bloodstock agents. These gentlemen (most are men) are learned in the dark art of pedigrees and have ‘the eye’ for a good horse, and most, if not all, will be gushingly called ‘a good judge’ by the auctioneer, when said agent gives the imperceptible wink for a bid.

To become an agent is not difficult.

Have you ever been asked to buy a horse for a friend or a client? If you have, then you are an agent, and now let me tell you just what legal nightmares this will open up for you.

An agent, in its simplest formulation, acts on behalf of someone else. That someone else is called ‘the principal’.

The principal is usually the chap with the cash, and the agent is the poor broke fellow that has the knowledge.

Usually in exchange for a percentage of the purchase price, or a fixed fee, the agent will trade the knowledge for some of the principal’s cash. Once the agent agrees to act for the principal, a contract is formed, and a fiduciary relationship and duty to exercise care comes into existence. ‘Fiduciary’ really sounds like something you should call the loud ugly bloke at the end of the bar who keeps spilling beer on you. However, it is a legal term of art, that is, an ancient word used to confuse non-lawyers.

A fiduciary relationship means that you, as the agent, must behave in a certain way toward your principal. You must follow the principal’s instructions, act in person, act in good faith, honestly and in the best interests of our principal; you must disclose any personal interest you may have in the horse you are buying; you must not make any secret profit – so no kick backs from the vendor; and finally, you must exercise reasonable care and skill in selecting your prospective purchases, and in what you say on behalf of your principal to the vendor.

So basically you have to be up front and honest, and you have to exercise reasonable skill. “What is reasonable skill?”, I hear you ask. Reasonable skill is exactly what it sounds like. It is the skill, and expertise that you could reasonably expect an agent to employ when they act on your behalf. It is what lawyers call an ‘objective’ test. You look at what happened and ask, ‘would a reasonably competent agent (yes a faceless, blank one with no name and less personality) have acted in this way?’.

Now the perennial whispered innuendo and scuttlebutt is that some unscrupulous agents take commissions from vendors at sales. Of course, no respectable vendor or agent would be a party to these shenanigans, but if they were, then they are in trouble.

Not only is the taking of a secret commission a criminal offence, it also leaves the agent open for a claim by their principal to recover the dodgy commissions. So while you are in prison, you also get to be sued by your principal.

It is also a criminal offence for a vendor to offer a secret commission to an agent. So the amusing hypothetical situation arises where dodgy vendor and dodgy agent get to do a bit of team sunbaking in stripy sunlight at one Her Majesty’s Resorts for the Morally Indigent.

Now, if you do find yourself acting as an agent for someone, please shout that fact aloud to the auction company, or the vendor.

If you tell the bloke selling the horse that you are an agent for someone else, then you won’t get stuck with the bill if your principal does the dodgy on you. There is no worse place to find yourself than being hunted by some bloodthirsty lawyer for a bill for a horse that you don’t have and, let’s face it, is probably broken down, or otherwise good only for pulling a bakery cart. If you disclose that you are acting for a principal, you will avoid a lot of trouble.

Those “appointment of agent” forms in the sales catalogue – fill one out and drop it into the office. Thirty seconds work might save you the price of half a house.

So the next time you are asked to look at a horse, or bid on a horse for someone, keep the pitfalls of being an agent in the forefront of your mind. Act honestly and disclose that you are only acting as agent, and your troubles will be few. We can only hope.

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