Ruling Favors Buyer on Conditions of Sale

In ruling on a lawsuit in which a buyer purchased a yearling that had undergone undisclosed invasive joint surgery, a judge has declared one of the Conditions of Sale at the Keeneland Association to be "unconscionable."

In the decision, Fayette (Lexington) Circuit Judge Ernesto Scorsone granted summary judgment in favor of Danny Pate’s Solitary Oak Farm, which had bought a colt, named Street of Dreams, at the 2008 Keeneland September yearling sale for $35,000.

Under Keeneland’s Ninth Condition of Sale, all horses under 2 years of age offered for sale that have undergone invasive joint surgery shall have that condition disclosed either by placing a veterinary certificate in the repository or by announcing its condition at the time of sale.

The colt was bred by Robert and Sandy Murphy’s Dare to Dream Farm and consigned to the sale by Rockwell Sales Agency. According to the court record, there was no information on file at the sale repository regarding any previous surgeries on the colt. Also, a representative of Rockwell at the sale responded negatively when asked by Pate whether the colt had undergone any surgeries, according to the court record, the opinion noted.

"This disclosure requirement is necessary because a horse having undergone invasive joint surgery is a reason for a potential purchaser not to buy a horse, and a visual inspection may not show evidence of an operation on the horse," Scorsone said in the decision.

The Ninth Condition of Sale further states that all horses are sold "as is" and that a buyer has a limited right to return the horse, requiring the buyer to notify Keeneland in writing and include a veterinary certificate within 14 days of the sale.

Scorsone noted that Pate, relying on the "misrepresentation that the colt had a clean bill of health" bought the horse for $35,000 but did not immediately put him in training. Once the colt was being prepped for racing, however, problems with his legs became apparent and he was taken to the Ocala Equine Hospital on Jan. 30, 2009, for surgery. It was at that time that it was detected the colt had undergone previous joint surgery.

"The defect, which was known to defendants, is not readily ascertainable via ordinary inspection," Scorsone said. "It was difficult, if not impossible, for the plaintiff to discover this defect within 14 days of the sale."

Scorsone said the 14-day limitation imposed upon the buyer is "inconsistent with the warranty’s purpose." Scorsone said the plaintiffs had acted within "reasonable time" period for return under Kentucky law because they notified Rockwell and Keeneland within 14 days of their discovery of the prior surgery.

"Here, the court limits the application to this contract of Keeneland’s Conditions of Sale, specifically the 14-day limited warranty period, as it is unconscionable based on the facts in the case. This avoids an extremely unfair result of enforcing an oppressive and unfairly surprising contract on purchaser Solitary Oak. Given the intentional misrepresentation, it was difficult if not impossible for plaintiff to discover the defect within such a short period of time. As such, the 14-day clause shall be stricken as unconscionable to avoid an unconscionable result."

Scorsone directed that all parties contact the court to schedule a hearing on damages.

Chris Rambicure, of the firm Rambicure Law Group PSC, which represented Rockwell, said his client will file a motion to "alter, amend, or vacate the ruling" within the 10-day deadline from the date of the opinion.

Walt Robertson, vice president of sales at Keeneland, said the company is reviewing the opinion and would have no comment at this time..

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