Equine Breeding Contracts: A Guide to the Basics
Equine breeding contracts are agreements between mare owners (mare owners are the owners of the broodmares) and stallion owners (stallion owners are owners of the services provided by their stallions) concerning the breeding of mares belonging to a mare owner to the stallion of a stallion owner(s). These contracts are important to both parties because they memorialize the terms of the agreement. In short, a mare owner wants to obtain a favorable breed service and then own a horse that is worth more than the cost of the breed fee. A stallion owner wants to do the complete opposite – receive a big fee for the breed service and not have to pay anything to anyone.
Breeding contracts are, like all contracts, a negotiation between the parties. The mare owner has the ability to bargain with the stallion owner about price, liability, risk transfer , etc. on terms that can be favorable to the cash flow of the mare owner’s business. A stallion owner has the ability to protect himself from those things and also wants to maximize the breed fee so the stallion’s "desk set-up" is paid for in a short amount of time.
The Mare Owner (potential breeding client) has to ask questions before signing what seems like a standard contract from the stallion owner. Does this stallion frequently pass the mare owner’s mare on the "presumption of loss" due to injury, illness or death? If so, what are the mare owner’s options then? Does the contract require an examination by the stallion owner’s veterinarian? What if the horse doesn’t get the diagnostic test done at all? These are the types of questions that a mare owner must ask to ensure that their business stays profitable.
Keep in mind that stallions (and by extension stallion farms) are licensed by the breed registries. Even if the stallion owner is not in the state where you are located, the state will have the police powers to prosecute if the stallion is not eligible for a passport or listed. Make sure that the stallion has a passport with the breed registry your mare is register with – in most cases this is through the Jockey Club.
Key Components of a Breeding Contract
By definition a horse breeding contract is a horse sale contract. It should contain the seller and buyer’s names, a description of the horse including a photo, the contract number, and date of contract. The contract should state whether the horse is registered with a breed organization and include a brief overview of the horse’s previous show career.
The following clauses should also be included in an equine breeding contract:
• Payment Terms. Include a statement that at the time of execution the buyer is paying the seller a certain amount, in cash or by certified funds. For example, "Venmo- $2400.00." State that the remainder of the purchase price is due on a specific date, for example, "the balance of $17600.00 plus a $600.00 booking fee is due not later than November 1st, 2021." You must also include the buyer’s full name and contact information so he/she can be easily located in the future.
• Mare Care. It is important to include a clause which states that mare care will be provided when the mare is in the seller’s facility, and that a price will be quoted at an appropriate time, such as 90 days prior to her arrival.
• Live Foal Guarantee. The mare owner wants to be assured that the stallion will produce a live foal, hopefully an exceptional one. The horse owner usually expects the stallion owner to guarantee a live foal. This is a win-win for the stallion owner as he has more opportunity to breed more mares. The problem with this clause is this: what happens if the mare abortions? When the circumstances are unclear, the parties usually have to resort to litigation to resolve the matter.
It rarely makes sense or is good business to litigate a live foal guarantee in the absence of a clear-cut legal agreement providing for such a guarantee. Litigation will probably cost more than the original value of the contract being measured by the potential sale price of the horse.
An alternative to including a live foal guarantee is to include a clause that states instead that the stallion owner will provide an additional breeding service if the mare does not produce a live foal.
• Special Injuries. Breeding horses requires veterinary care even for the most routine vaccinations. When breeding or transporting a pregnant mare, there is always a risk of injury or abortion. Be clear in the contract as to who is responsible for the expenses incurred if an injury occurs to the mare.
• Breeding Rights. It may be mutually beneficial to both the mare and stallion owners to add a clause stating that the mare owner will have breeding rights to one or more additional horses owned by the stallion owner. This may help both the stallion and mare owners’ bottom line. If you’re not certain whether this type of clause will be mutually beneficial, leave it out, as it is difficult to determine the potential damage or harm it could do.
• Indemnification Clause. The mare owner should agree to indemnify the stallion owner against any lawsuits or claims brought by the buyer of the resulting foal. A horse breeding contract is a sale of the foal and stallion to the mare owner. The stallion owner will want to protect himself from negligent acts that result in harm to anyone who owns the resulting foal.
Legal Issues and Risk Management Strategies
A horse breeding contract is a legally binding document and allows parties to outline their agreement and protect their interests. It is important to have a breeding contract for the protection of both the mare owner and stallion owner. Breeding contracts may also protect the interests of any third-party which has interests in the foal. For example, if a stallion is bred to a mare owned by a mare owner which has a loan out on the mare from a lender, the lender could be considered a party with an interest in the foal.
Consideration, the something of value that is exchanged between the mare and stallion owner, is required for the contract to be valid. Breeding contracts may be considered enforceable contracts, even if the stallion has not been conceived, fetus is not detected at 20 days after breeding, or the embryo is not transferred if frozen embryos are involved. Horse breeding contracts are executed all the time and the terms of the contract will determine when conception, a 20-day heartbeat check, or a transfer of an embryo is required.
If the mare cannot produce a live healthy stallion out of full season or never produces a live stallion, the mare owner may still be required to pay full fees. All breeding contracts should require a return of the mare for breeding in the next breeding season. It is common for contracts to require a return of the mare for breeding in the next breeding season to the stallion for a live foal or embryo transfer for 60 days after a heartbeat is not detected in the embryo. There are several liability clauses which should be included in the contract to protect both parties. Where the embryo is not able to be transferred, the contract will require a stallion live foal or embryo to be replaced the following breeding season.
Horse breeding contracts are generally negotiable during breeding season. For stallion owners, the length of the breeding contracts can be shortened as much as a few days before being extended throughout the year.
Breeders need to protect their investment. Insurance policies can be used to protect against the loss of a mare or foal from breeding.
Potential Problems with Breeding Contracts
Despite the best efforts of both parties, disputes may nonetheless arise. Detailed discussion of the process helps to limit misunderstandings between the parties. Knowing what is fairly common helps the parties to act and reach agreement before disagreements arise.
Common disputes include:
Disagreements over payment of fees
Disputes over purported non-performance
Disagreements as to whether a horse is in foal
Disputes over the foal
The best means to avoid or minimize dispute and litigation is to accurately document the bargain between the parties. Clearly setting out policies, payments, and procedures in sufficient detail to inform both parties of their respective obligations is essential. Good communication between the parties about the nature and quality of services is perhaps the most effective means of avoiding costly disputes. When problems do arise, however, several strategies can help resolve the dispute. For example, when a disagreement does arise, the aggrieved party should fully document its dispute, and communicate it promptly in writing to the offending party. Prompt notification of the dispute is critical because many contracts require certain claims to be made within a set time period, otherwise forfeited. The following steps are most often used in resolving disagreements, with increasing complexity and cost:
Good relationships help, as well. Often, many questions can be effectively managed simply by having successful short conversations at the open of each breeding season in which the parties sit down and review the prior year’s performance. When things are going well, you will obviously want to continue, particularly if your mare has had a healthy foal in the past year. But, even when things are going badly, it is often in everyone’s best interest to sit down and agree to a reasonable solution. A telephone call is often all that is needed to resolve a problem, without requiring either party to incur legal fees.
Analysis: Breeding Contract Case Studies
Consider these case studies that illustrate how things can go right, or wrong, when it comes to equine breeding contracts.
Case Study 1 – Dispute Over Maiden Breeding Fees
A typical case involves breeders of Thoroughbred horses that breed a mare for a specific fee to another breeder’s stallion. There is a contract between the two breeders and often it calls for subsequent fees to be paid after the mare has been bred. The timeline for the later payments can become quite blurry and cause problems, such as when a mare is bred in December but not discovered to be in foal until June of the following year. The question then becomes should later payments be prorated based on time elapsed or calendar year? What exactly do the contracts say? How do the contracts read versus the written intentions of the parties? Best advice is to obtain legal assistance in drafting the initial contracts so the language is precise.
Case Study 2 – Mare Develops Laminitis
Another case involves a dispute arising from a breeding contract which stated that if a mare developed laminitis after breeding , the horse would be required to abort the resulting pregnancy. After breeding, the mare developed the chronic and painful disease and underwent laminitis treatment and had to be terminated from her training regimen. The parties disputed whether treatment would be required and whether an abortion was practical. The costs associated with providing treatment or termination of the resulting pregnancy were and still are in dispute. The lesson here is that the parties should have discussed their intentions more thoroughly and put them into the agreement. Aborting live foals is not acceptable under common law and is quite problematic under animal cruelty statutes. Common sense and compassion must be afforded to animals in all cases.
Case Study 3 – Implications of Bankruptcy
If you are a breeder of Thoroughbreds, the take away here could have been how to protect yourself in the event of bankruptcy by the other party to the contract. When dealing with a trainer, it is essential to find out during the contract stage what the trainer’s intentions are and how he plans to act under terms of the contract.
Best Practices for Equine Breeding Contracts
When it comes to drafting an enforceable and effective equine breeding contract, there are several key elements to consider. First, the parties’ obligations must be clearly defined. In other words, each party should know and understand what is required of them under the contract. The contract terms should not be vague or open to more than one reasonable interpretation. As always in contract law, if it is not clear, then the terms probably will be interpreted against the drafter. Second, the terms of performance for the contract (for example, timing, measurements, and/or manner) should be specifically described. If the breeding or related services are to be performed at a specific time, then make sure that the specific date or, at the very least, a range of times for performance appears in the contract. In addition, the contract should state what will happen if the work described is not completed by a certain time. Third, if the transaction involves a sale of goods, equally important as the terms of performance, is the mirror-image principle of contract formation. Texas law provides that an acceptance is only effective when it is actually communicated to the offeror according to the terms of the offer. This means that the offeror retains the right not to perform until the offeree actually communicates its acceptance. Therefore, if the agreement will require a sale of horses, it is imperative that the terms of the offer (price, payment terms, etc.) be mirrored exactly by the offeree’s acceptance. Fourth, if the contract is not for a sale or other exchange of goods, but for a service or professional endeavor, it is important to ensure that it contains language that limits the liability of the parties in the event of a claim. Finally, again, make sure the contract is clear. If after reading the agreement, a reasonable person would have more than one interpretation of the terms of the contract, then it is probably not well written.
Future Directions in Equine Breeding Agreements
As breeding technology continues to advance, the industry may see greater standardization in the types of contracts used by horse farms and owners. In particular, contracts governing artificial insemination and embryo transfer will likely be updated to reflect modern veterinary practices more accurately. For example, contracts may include more explicit terms regarding the storage of frozen semen or embryo management. Some may even reflect the growing use of pre-conception genetic testing to inform breeding decisions.
We could also start to see more innovative approaches to traditional contracts. Livestock farms have often used standardized contracts for years when selling livestock , such as poultry. These contracts might one day enter the Thoroughbred world. Such a contract could give farms the option of purchasing live foals from certain sires to accommodate the variable fertility rates of different breeds and mares. In the future, there may also be more contractual options for sharing genetic material across multiple farms for using AI or embryo transfer.
More recently, equine databases have simplified the compilation of genealogical data and record-keeping for owners, which could lead to standardized contracts to facilitate the exchange data. Effective digital contracts could also simplify the potential sale of breeding rights between horse farms, and instead of breeding farms fighting over territories, we could start to see more rational systems for making that decision.