Exam B
Test your knowledge of equine law. by Attorney Krysia Nelson
Do Restrictions Work?
etty Buyer bought “Leroy” from Sally Seller for $10,000 (his then fair market value). In the Bill of Sale, Sally inserted the following
language: “Restriction on subsequent transfer: Buyer
agrees that she will not ever sell, gift, or otherwise transfer ownership of Leroy to any other person or entity other than Seller. If or when Buyer no longer wants Leroy, Seller will buy him back for $1,000.” The Bill of Sale did not provide any further de- tail about the transfer restriction. After owning Leroy for five years, Betty has to
move across the country to care for an ailing and elderly parent. She tries, without success, to locate Sally. Faced with the time constraints of her own family emergency, Betty sells Leroy to Rita Rider for $5,000 (his then fair market value). The Bill of Sale Betty gives Rita does not mention the “Restric- tion” from Sally’s Bill of Sale, nor does it contain any restriction on Rita’s ability to subsequently transfer ownership of Leroy. Betty doesn’t tell Rita anything about the restriction or the possibility
U
nless you picked (d), you would be reversed on appeal.
Sally does not have a lawsuit against Rita. Rather, she has a potential claim against Betty for breach of contract. Since Rita did not know about the Restric-
that Sally might want Leroy back. Rita is competing Leroy at a local show when she is approached by Sally, who inquires about Rita’s ownership of Leroy. Rita confirms that she bought Leroy from Betty, and volunteers the cir- cumstances surrounding Betty’s cross country move. Rita goes on and on about how much she loves Leroy and how he is her dream horse and new best friend. Sally smiles and congratulates Rita, and leaves. One week later, Rita is served by the sheriff. Sally is suing Rita to get Leroy back.
You be the judge. How would you rule? a) Sally wins. The restriction is valid and Betty had
no right to sell Leroy, so Rita has to give him back to Sally. b) Sally wins, but she has to pay Rita $1,000 in
order to get Leroy back. c) Sally can have Leroy back if she pays Rita
$5,000. d) Rita wins and gets to keep Leroy. The restric- tion is not enforceable against Rita.
tion in the contract between Betty and Sally, and be- cause she paid a fair market value for Leroy, her owner- ship interest is protected by law. (She is considered a bona fide purchaser for value.) The person Sally should sue is Betty, although do-
ing that won’t get her Leroy back. A breach of contract claim against Betty would be for money damages only. Betty is not in any position to disturb Rita’s ownership at this point. However, rather than filing suit, it might have been
more productive for Sally to reach out to either or both Betty and/or Rita. Since Betty knew that she shouldn’t sell Leroy to anyone, one solution would for her to bro- ker some agreement between Sally and Rita—perhaps for a refund of her $5,000, Rita would agree to a similar restriction and agree to sell Leroy back to Sally. Or per- haps Sally would be happy just knowing where Leroy is and that he now has a loving, forever home. Either way, an out of court resolution would probably involve Betty
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