[*PG789]SADDLED WITH A LAME HORSE? WHY STATE CONSUMER PROTECTION LAWS CAN BE THE BEST PROTECTION FOR DUPED HORSE PURCHASERS
Abstract: Many first-time horse purchasers have little experience with the equine industry and are thus vulnerable to the use of deceptive and unfair practices by the more knowledgeable seller. In situations where inexperienced horse purchasers are duped into buying ill or otherwise defective horses, there are two potential claims that purchasers can make for relief: U.C.C. claims or state consumer protection act claims (“CPAs”). Because courts in U.C.C. claims cases tend to focus on the contractual relationship between the parties, inexperienced horse pur-chasers’ relief through the U.C.C. is often limited. Indeed, the goal of the U.C.C. is to regulate relationships between buyers and sellers and to encourage thier freedom to contract. The goal of CPAs, on the other hand, is to address unfair and deceptive trade practices. This Note will argue that duped purchasers should always file CPA claims rather than U.C.C. claims against unscrupulous horse sellers because of the greater protection and broader relief CPAs have to offer.
Contrary to popular opinion, not all horse owners are wealthy businesspeople with experience in the equine industry.1 In reality, many horse purchasers are first-time buyers with little or no such experience.2 Often, they seek a reliable horse for recreation or occasional showing, not a million-dollar racehorse or grand prix winner.3 Novice horse purchasers typically do not know how to select a suitable horse and instead rely on a horse seller’s advice when making a purchase.4 Serious legal problems can arise when unscrupulous horse sellers take advantage of these inexperienced purchasers by selling them defective horses.5
[*PG790] Consider the following hypothetical: Abigail Miller is a ten-year-old girl with dreams of one day becoming a famous Olympic equestrienne.6 Her parents have no prior experience with horses but encourage her dream by funding riding lessons twice a week at a local stable. For Abigail’s eleventh birthday, her parents decide to buy her a show pony that requires little training and can win at jumping events. The Millers learn about a local stable from its advertisement in a newspaper stating that it specializes in selling show jumping ponies for children of all riding capabilities.
Abigail and her parents go to the stable and see Buttercup—an adorable palomino pony—and instantly fall in love with him. When Mr. Johnson, the owner of the stable, tells the Millers that Buttercup is the son of two very successful show ponies and is an impressive jumper, Abigail’s parents know they have found the perfect pony and buy him for $10,000.
Soon after the pony arrives at the Millers’ stable, however, he becomes lame and unrideable. The Millers’ veterinarian informs them that Buttercup has weak tendons and should not be used for jumping but could be a nice trail horse. Devastated, the Millers attempt to return Buttercup to the stable. Mr. Johnson acknowledges that he was aware of the pony’s tendon problems, but refuses to return their money, showing the Millers a copy of the contract they signed. The contract contains several bold-typed disclaimers against all warranties, stating that the pony was sold “as is.” In addition, Mr. Johnson denies making any guarantees about the pony’s capabilities and argues that he did not say anything false—it is literally true that Buttercup is an impressive jumper.
Horse purchasers in the Millers’ situation, stuck with an undesirable equine, might have some legal remedies against sellers like Mr. Johnson.7 Like the Millers, a growing number of horse owners in the United States want to own a successful competitor; yet, many of these people are not active in the equine industry, lack basic horsemanship skills, and do not have the ability to select a prospective champion.8 These new horse purchasers are likely to rely on sellers’ representations and therefore are particularly susceptible to deception and unfair practices throughout an equine sales transaction.9
[*PG791] Crooked horse dealers have existed for hundreds of years, from a time when people used horses for transportation and farming, to the present, when people primarily use horses for recreation and competition.10 It is not uncommon for an unscrupulous horse seller to take advantage of inexperienced, first-time horse purchasers like the Millers by convincing them to purchase a horse with a latent, undisclosed physical defect that will make the horse unable to meet the purchaser’s expectations.11
Traditionally, courts applied the doctrine of caveat emptor—let the buyer beware—in equine sales, leaving both experienced and inexperienced purchasers with unwanted, defective horses.12 Most modern courts find more equitable solutions for purchasers in claims brought under the Uniform Commercial Code (“U.C.C.”) or common law.13 Recently, courts have begun to consider whether state consumer protection acts (“CPAs”) apply in equine sale disputes.14
Although CPAs often provide a viable cause of action for deceived horse purchasers, practitioners in equine-related disputes typically have avoided analyzing the application of CPAs and instead have focused on claims under the U.C.C.15 Courts interpreting the U.C.C., however, fail to protect unsophisticated horse purchasers in many situations by focusing on the contractual relationship between purchaser and seller and assuming that both parties are knowledgeable of the equine industry.16 Courts applying CPAs, on the other hand, protect purchasers more broadly and flexibly than those applying the [*PG792]U.C.C. by focusing on standards of unfairness and deception, rather than the contractual relationship.17 Thus, CPAs are more likely to help novice horse purchasers who, like the Millers, unwittingly contract away their rights.18
To understand how CPAs can better protect novice horse purchasers than the U.C.C., this Note examines the application of both types of statutes and their available remedies in equine sales transactions.19 Part I explains the application of the U.C.C. to equine sales transactions and analyzes particular aspects of the U.C.C. that deal with deceived horse purchasers’ possible rights and remedies.20 Part II examines the application of CPAs to equine sales transactions and discusses the rights and remedies CPAs provide deceived horse purchasers.21 Part III compares how the U.C.C. and CPAs protect horse purchasers and argues that CPAs provide more thorough protection and relief for novice horse purchasers than the U.C.C.22 This leads to the conclusion that deceived, novice horse purchasers should always consider filing a CPA claim against a deceptive horse seller.23
The U.C.C. regulates relationships between purchasers and sellers to encourage freedom of contract and the continued expansion of commercial transactions.24 Article 2 of the U.C.C., which applies to transactions in goods, is the most relevant article dealing with contractual matters such as horse sales.25 The U.C.C. characterizes sales of horses and unborn or future foals as transactions in goods.26 Consequently, the doctrines laid out in Article 2 apply to equine sales.27
[*PG793] One of the most basic of these doctrines is the Statute of Frauds, which requires that contracts for sales of goods in excess of $500 be in writing.28 Accordingly, a contract for the sale of a horse for more than $500 is enforceable if it is in writing and is signed by the party against whom enforcement is sought.29 One exception to the Statute of Frauds requirement is if there is a written memorandum confirming the agreement, the transaction is between merchants, and neither party objects in writing to the memorandum in a timely manner.30 A merchant in the equine industry has, or is perceived to have, knowledge or skills particular to the type of horse he or she is buying or selling.31 Many people in the equine industry fall into this category.32 Furthermore, courts will impute merchant status to non-merchants if a broker or knowledgeable friend helps with the purchase, which is a common practice.33
Other exceptions to the Statute of Frauds requirement do exist.34 Among them, section 2–201(3)(c) of the U.C.C. is particularly relevant to equine sales.35 Under this section, if a party to the transaction has received and accepted either payment or the horse, a court can enforce the contract regardless of a violation of the Statute of Frauds.36 Thus, even oral agreements, or those in which neither party is a merchant, bind the parties after one performs without the other’s [*PG794]objection.37 This is critical in equine sales, which are often completed by a handshake in private verbal negotiations or a nod of the head at a public auction.38
A written contract, however, is always preferable in equine sales.39 The U.C.C. provides that the written contract is the primary source for determining the terms of a sale.40 Written terms may be explained or supplemented by evidence of consistent additional terms; consequently, evidence of prior or contemporaneous oral agreements between the horse purchaser and seller can be admitted into evidence should a subsequent dispute arise, as long as they do not contradict the written contract.41 In addition, course of dealing, customs in the equine industry, or course of performance can explain or supplement written terms of a contract.42 For example, if the parties have dealt with one another during prior equine sales transactions, courts can interpret unclear or disputed terms in light of those prior transactions.43
The rules regarding written contracts apply not only to private equine sales but also to public horse auctions.44 Most auction houses require horse purchasers to sign an acknowledgment of purchase soon after the completion of any sale.45 Sellers also sign consignment contracts, which make sales contingent upon receipt of final bids.46 Yet, auction sales of horses differ from private sales in several respects.47 For example, auctions employ a competitive bidding format, so purchasers and sellers rarely meet.48 The most significant difference, however, is that an auction company typically establishes the terms of the contract between the parties in its Conditions of Sale, printed in its sales catalog.49 The Conditions of Sale include the warranties and warranty disclaimer provisions included in the terms and conditions of most purchase contracts.50
[*PG795] In private equine sales, however, purchase contracts occasionally do not contain any warranty or disclaimer of warranty provisions.51 The existence of such warranties is crucial in determining whether an unsatisfied purchaser can obtain relief upon discovering that a horse is unhealthy or unsuitable for the purposes for which it was purchased.52 Many disputes between purchasers and sellers revolve around whether an express or implied warranty exists, and if so, whether a breach has occurred.53 Thus, determining whether a duped horse purchaser should file a U.C.C. claim requires an understanding of the available warranties under the U.C.C. and the remedies they provide in equine sales disputes.54
Upon discovering a defect, unsatisfied horse purchasers have two main methods of relief under the U.C.C.55 A purchaser can try to rescind a purchase by either rejecting the horse or revoking acceptance of the horse.56 Rescission by either method requires the seller to return the purchase price to the purchaser in exchange for the return of the defective horse.57 Alternatively, a purchaser can seek damages for breach of warranty.58
Most unsatisfied horse purchasers prefer rescission because they do not want to continue paying for a horse that has failed to meet their expectations.59 Rescission can be an insufficient remedy, however, because it has severe time constraints and therefore often does not apply.60 For example, a purchaser can reject a horse for failure to conform to the contract only if the purchaser does so prior to acceptance of the horse and within a reasonable time after the horse’s delivery.61 Once the purchaser accepts the horse, the purchaser can only revoke acceptance within a reasonable time after the purchaser discovers, or should have discovered, the nonconformity.62
[*PG796] After the time of revocation has passed—usually a very brief window of opportunity63—a horse purchaser who learns of a defect can still obtain relief in an action for damages against the seller for breach of express or implied warranties.64 In pursuing such an action, the purchaser must notify the seller of the defect in a timely manner and must be able to establish the existence and breach of such warranties.65 This notice allows the seller to mitigate damages or correct the problem and protects the seller from old claims.66
To prove that the horse seller created an express warranty, the purchaser must show that the seller promised or represented, either orally or in writing, that the horse possessed certain desired qualities.67 Such representations are significant because they often induce a purchaser to buy a horse.68 For example, in 1986, in Alpert v. Thomas, the United States District Court for the District of Vermont concluded that the seller created an express warranty that induced the purchaser to buy a stallion for breeding purposes by stating that the farm would conduct a breeding soundness evaluation and by assuring the purchaser that the stallion was “breeding sound.”69 When the stallion failed to impregnate mares, the purchaser successfully revoked acceptance, and the court awarded the purchaser the return of the purchase price already paid plus interest, as well as over $25,000 in expenses incurred in transportation, care, custody, and insurance of the stallion.70
Frequently horse sellers unintentionally create express warranties when they make oral statements in connection with the sale of a horse.71 In such instances, courts must distinguish between mere puffing—exaggerating in an entertaining manner—or trade talk, nei[*PG797]ther of which creates express warranties, and an affirmation of a fact about the horse, which does create an express warranty.72 This distinction is subjective and depends on the specific circumstances in each case and the preferences of the court.73 For example, in 1977, in Sessa v. Riegle, the United States District Court for the Eastern District of Pennsylvania found that the seller’s statement, “the horse is sound,”74 spoken to the purchaser during a telephone conversation, constituted an opinion rather than an express warranty.75 On the other hand, in 1965, in Norton v. Lindsay, the United States Court of Appeals for the Tenth Circuit concluded that a statement regarding a horse’s soundness was an express warranty because it implied that the horse had no defects that would frustrate the purposes for which the purchaser bought it.76 Courts frequently determine that predictions about a horse’s future are mere puffing because such statements by their nature are purely speculative and therefore cannot create express warranties.77
When a seller induces a purchaser to buy a horse by stating or affirming that the horse has certain desirable characteristics that it does not have, and the court does not consider such statements mere puffing, the purchaser can sue for a breach of express warranty.78 For example, in 1988, in Travis v. Washington Horse Breeders Ass’n, the Supreme Court of Washington upheld such a claim.79 In Travis, the sellers assured the purchaser of the horse’s health and its fitness for racing and breeding, yet one week after the sale, the purchaser learned that the horse had a heart murmur and thus could not carry a rider.80 The court concluded that the horse sellers’ statement constituted an express warranty that induced the purchaser to buy the horse; there[*PG798]fore, the court upheld the purchaser’s breach of express warranty claim.81
In addition to express warranties, three types of implied warranties under the U.C.C. frequently arise in equine sales disputes.82 The first applicable implied warranty is that the title conveyed is good, its transfer is rightful, and the horse is free of any encumbrance.83 This warranty is relevant to equine sales because liens and security interests often attach to expensive horses.84 Also, sellers occasionally sell horses that they do not actually own, and questions of title emerge.85
A more commonly disputed implied warranty in equine transactions is the warranty of merchantability.86 As applied to equine sales, barters, or exchanges, this warranty provides that the purchased horse must conform to its contract description and must be fit for the ordinary purposes for which it is used.87 Frequently there is a breach of the implied warranty of merchantability in equine sales if the horse has a physical problem making it unsuitable for its intended commercial purpose and therefore unmerchantable.88
The implied warranty of merchantability demands strict liability, so courts will hold horse sellers liable regardless of their lack of knowledge or inability to discover the defect upon reasonable inspection.89 Sellers must be merchants, however, for a warranty of mer[*PG799]chantability to apply.90 Sellers also can modify or exclude this warranty by oral statement or a conspicuous writing that includes the term “merchantability.”91 Moreover, purchasers are deemed to have waived the warranty of merchantability if they know of a defect at the time of purchase.92
The third type of implied warranty—guaranteeing fitness for a particular purpose—does not require that the seller be a merchant.93 To establish a claim for this warranty, a purchaser must demonstrate a seller’s awareness that the purchaser bought the horse for a particular purpose other than its ordinary purpose and did so in reliance on the seller’s skill and knowledge in choosing an appropriate horse for that particular purpose.94 The purchaser’s reliance on the seller is the most important element in determining whether an implied warranty of fitness for a particular purpose exists.95 There is, however, no uniform standard of deciding whether the purchaser reasonably relied on the seller.96 In some cases, courts have found an implied warranty of fitness for a particular purpose even though the purchaser should have recognized the unreasonableness of relying on the seller.97 In other cases, in which a purchaser could have reasonably relied on a seller’s statements but instead mainly relied on statements by the purchaser’s own agent, courts have found no such warranty.98 Finally, [*PG800]some courts, reasoning that a seller is in no better position to know the fitness of the horse than a purchaser, occasionally will apply the doctrine of caveat emptor rather than find sufficient reliance.99
Like the implied warranty of merchantability, the implied warranty of fitness for a particular purpose bears strict liability that a seller can disclaim.100 For example, in Travis, the Supreme Court of Washington declined to find either an implied warranty of merchantability or an implied warranty of fitness for a particular purpose because the Conditions of Sale in the auction catalog effectively disclaimed all implied warranties by making the warranties available for all purchasers to read.101 Although such disclaimers extinguish implied warranties most directly, other ways to extinguish them do exist.102 In the equine industry, a purchaser’s examination of a horse to the purchaser’s satisfaction negates any implied warranties.103 This examination exception often applies in situations such as auctions, where purchasers or their veterinarians customarily examine horses prior to purchase.104 For example, in 1989, in Cohen v. North Ridge Farms, Inc., the United States District Court for the Eastern District of Kentucky concluded that the purchaser assumed the risk of loss because he acted in conscious ignorance by electing to purchase the horse without requesting a pre-sale examination, which would have shown the horse’s respiratory problems.105
Similarly, a refusal of a seller’s invitation to examine a horse prior to entering a contract is another type of examination exception.106 If a purchaser refuses to conduct an examination that would not have revealed the defect at issue, however, a court may still grant the pur[*PG801]chaser relief.107 Moreover, if the seller actively conceals a defect that one could normally observe upon inspection, the implied warranty applies.108
In addition to disclaimers and the examination exception, horse sellers can limit potential remedies for purchasers within the contract.109 A limitation on remedies restricts the purchaser’s available remedies even when there could be a valid breach of warranty claim.110 For example, in 1978, in Calloway v. Manion, the United States Court of Appeals for the Fifth Circuit upheld a jury finding that the plaintiff had contractually limited his remedy for a breach of express warranty and thus could not receive relief under Texas’s U.C.C.111 In Calloway, the plaintiff and defendant swapped horses and orally agreed that if the mare the plaintiff received in exchange for a gelding112 was unsatisfactory, his sole remedy would be to return the mare in exchange for a $10,000 credit on another, higher-priced horse.113 The court rejected the plaintiff’s U.C.C. claim, concluding that a jury could reasonably find that the plaintiff’s failure to pursue this limited remedy was enough to invalidate the breach of express warranty claim.114
Occasionally, courts will find such remedy limitations or disclaimers unconscionable and therefore may not enforce them.115 A horse purchaser can argue the unconscionability of a contract based on inadequate consideration or unequal bargaining power.116 In an equine sales transaction, however, courts rarely strike contractual provisions to which both parties have agreed.117 Courts impute a high level of understanding and sophistication to parties involved in these sales transactions; therefore, they usually find that the parties willingly agreed to all the terms of a contract, even those that may seem unfair.118
[*PG802] When remedies are not limited, and disclaimers do not prevent relief, a successful horse purchaser can receive damages for a breach of warranty.119 Courts typically calculate damages for breach of express or implied warranties by determining the difference, at the time and place of acceptance, between the value of the horse as is and the value the horse would have had in its warranted condition.120 Occasionally the purchaser can also receive consequential damages for transportation, insurance, stud fees, care, and training costs.121 The U.C.C., however, provides no recovery of attorney’s fees.122
The contract-based remedies available under the U.C.C. reflect the main purposes of the U.C.C., which include simplifying, clarifying, and modernizing the law governing commercial transactions and permitting the continued expansion of commercial practices through custom, usage, and agreement between the parties.123 These purposes show that the U.C.C. protects the relationship between purchasers and sellers by encouraging freedom of contract.124 Encouraging freedom of contract, however, fails to protect unsophisticated horse purchasers who unwittingly agree to contracts with unfavorable terms.125 Consequently, the U.C.C. does not always provide adequate protection for novice horse purchasers.126
Whereas state legislatures have enacted the U.C.C. to protect freedom of contract, state legislatures have enacted CPAs to prevent deception and abuses against consumers in the marketplace.127 Thus, CPAs often provide unsophisticated horse purchasers better remedies [*PG803]than the U.C.C.128 Moreover, novice horse purchasers may find themselves in situations in which the U.C.C. will not protect them, but CPAs will.129
Every state has enacted at least one statute to protect consumers from deception and abuse in the marketplace.130 State legislatures have patterned many of these statutes, applicable to most consumer transactions, including equine sales, after section 5(a)(1) of the Federal Trade Commission Act (“FTCA”), which prohibits unfair or deceptive acts or practices.131 This Note refers to these state statutes collectively as Consumer Protection Acts (“CPAs”).
CPAs, like the FTCA, limit the caveat emptor doctrine by providing flexible and practical state and private remedies for consumers whom sellers deceive or abuse.132 Serious consumer abuses of almost any form are likely constitute CPA violations because legislatures have passed these statutes to remedy marketplace imbalances, thereby protecting the public.133 CPAs also protect the public by creating strict penalties against deceptive sellers, such as payment of attorney’s fees and punitive, treble, or minimum damage awards for prevailing consumers.134 In addition, CPAs protect sellers to some degree, as many states require that a consumer planning to file a CPA cause of action send notice or a demand letter to the seller, providing the seller an opportunity to remedy the situation out of court.135 Legislatures and courts generally read CPAs broadly and flexibly, often prohibiting un[*PG804]fair and deceptive practices generally rather than specifically prohibiting enumerated practices; consequently, CPAs often provide a very useful cause of action in equine sales disputes.136
Another benefit of CPA claims in equine sales is that they are not contract claims, so “as is” clauses, remedy limitations, disclaimers of warranties, failure to inspect horses prior to purchase, and other contract defenses do not prevent recovery.137 Courts will even find an equine sales contract that violates the Statute of Frauds violative of a CPA if the deceptive practices do not relate to the contract itself.138 For example, in 1987, in McClure v. Duggan, the United States District Court for the Northern District of Texas upheld such a claim.139 In McClure, the plaintiff claimed that he orally agreed to buy the defendant’s horse for $600,000, but then decided not to buy the horse based on the defendant’s statement that it would not pass the veterinary inspection.140 The plaintiff later learned that the defendant had sold the horse to a different purchaser and that the horse had won $175,000 in a race.141 The plaintiff sued on several claims, including breach of contract and violation of the state’s CPA, the Texas Deceptive Trade Practices Act.142 The court refused to acknowledge the existence of a contract because the alleged agreement violated the Statute of Frauds.143 The court found, however, that the defendant’s misrepresentation that the horse would not pass the veterinary inspection was separate from the underlying contract.144 Therefore, the court refused to grant the defendant summary judgment on the CPA claim, concluding that the Statute of Frauds did not insulate him from CPA liability for his alleged fraudulent misrepresentations.145
Deceptive acts such as the misrepresentation and fraud in McClure are examples of how unsatisfied horse purchasers can prove [*PG805]CPA violations.146 Sellers often violate CPAs if they mislead consumers in any way and at any point during a sales transaction.147 In determining whether a seller misled a consumer, some courts consider the consumer’s level of sophistication and will provide more relief for novice purchasers than for experienced purchasers.148 Frequently, the consumer need not show knowledge, intent, or even actual reliance to prove a deceptive act.149 In addition, courts often consider failure to disclose just as deceptive as actual misrepresentation.150
Although CPAs may broadly prohibit deceptive practices in trade or commerce, they occasionally limit the scope of private actions or remedies by narrowly defining terms such as “consumer,” “supplier,” “consumer transaction,” “sale,” or “goods and services.”151 Consequently, the applicability of CPAs in equine sales often depends on a court’s interpretation of such terms.152 For example, courts may find that isolated sales by non-merchants do not fall within a CPA’s definition of trade or commerce.153 Also, a CPA itself often does not contain a definition of “goods.”154 In such cases, courts frequently refer to definitions in the U.C.C. for clarity.155
Many states characterize living property like horses as “goods” within the definition of the CPA.156 In Texas, horses are tangible chattels and therefore subject to the state’s CPA, which defines goods as tangible chattel or real property purchased or leased for use.157 Similarly, the Supreme Court of Vermont has determined that the Ver[*PG806]mont Consumer Fraud Act covers horses under its definition of “goods.”158 Kentucky’s CPA, however, does not define consumer goods to include Thoroughbred horses; consequently, no private cause of action exists for a dissatisfied Thoroughbred purchaser because the CPA requires that goods be for personal, family, or household purposes.159
Dissatisfied horse purchasers can argue two different types of CPA violations—automatic violations and violations because the practice is generally unfair or deceptive.160 A violation is automatic if the CPA specifically prohibits the practice at issue.161 Such a claim can easily procure relief because the court does not have to consider whether deception or unfairness occurred.162 For example, some courts find that a breach of warranty under the U.C.C. automatically violates a state’s CPA; in these states, if horse purchasers can prove breach of express or implied warranty, they also can satisfy a CPA claim without demonstrating a deceptive or unfair practice.163 Some common-law torts, such as fraud, also are automatic CPA violations.164 For example, in McClure, the United States District Court for the Northern District of Texas implicitly concluded that the defendant was not entitled to summary judgment on the plaintiff’s CPA claim because the plaintiff sufficiently plead a common-law tort of fraud.165
Practices that do not violate a specific, CPA-enumerated prohibition, however, are not automatic violations.166 Yet, a horse purchaser [*PG807]still can prove a CPA violation by demonstrating a deceptive or unfair practice.167 Some CPAs only apply to deceptive practices, whereas others apply to both deceptive and unfair practices.168 To see how unfair or deceptive practice claims work under CPAs, it is important first to understand the standards of deception, unfairness, and unconscionability, and then to look at the remedies available to deceived horse purchasers.169
Instead of looking at precedent to determine whether a practice is deceptive, courts look at whether the sales activity or representation at issue could mislead or deceive even a handful of unsophisticated consumers.170 For example, in 1984, in Appleby v. Hendrix, the Texas Court of Appeals determined that the defendant’s advertisement in a horse breeders’ magazine stating that “these horses need a home where their excellent bloodlines can be effectively used” represented that the horse the plaintiff ultimately purchased was a fertile stud.171 In reality, the stallion lacked the ability to impregnate the plaintiff’s mares.172 Thus, the court implicitly determined there could be a CPA violation because the defendant’s advertisement had the tendency to mislead purchasers such as the plaintiff.173
One straightforward way to show the potential deceptiveness of a practice involves demonstrating that the defendant seller actually deceived the plaintiff.174 For example, in 2002, in Back Bay Farm, LLC v. Collucio, the United States District Court for the District of Massachusetts implicitly found that the plaintiff might be able to prove a violation of the state CPA by showing that the defendant had knowingly [*PG808]used false and deceitful tactics when selling the plaintiff a horse.175 The court determined that the plaintiff might be able to establish that the defendant’s misrepresentation of the horse’s suitability for an average rider actually deceived the plaintiff.176 The court found that the misrepresentations, in conjunction with the defendant’s agreement and subsequent refusal to return the plaintiff’s purchase price of $60,000, could satisfy the CPA’s definition of unfair acts and practices.177
The standard of deception under most CPAs, however, does not require actual deception, and instead only requires that a practice have the capacity or tendency to deceive potential purchasers.178 Accordingly, courts have found practices deceptive under CPAs despite the truthfulness of statements, the subsequent clarification of statements, and the existence of contract defenses such as warranty disclaimers.179 Moreover, courts characterize silence or failure to disclose a material fact as deceptive, even when the seller’s actual representations did not mislead the purchaser.180 A seller’s state of mind is unimportant—courts find a practice deceptive if it has a tendency to mislead unsophisticated and vulnerable consumers.181 Based on Minnesota’s CPA, for example, courts enjoin any fraud or misrepresentation committed with the intent that others rely on it in connection with the sale of any goods—including horses—even if the fraud or misrepresentation did not in fact mislead, deceive, or damage any person.182 In addition, most CPAs prohibit the defense that the entire industry engages in the challenged practice or that the practice is customary business conduct.183
Moreover, CPAs typically do not require proof of intent to deceive.184 Courts in the State of Washington have determined that a purchaser of a defective horse need not show that the seller intended [*PG809]to deceive the purchaser.185 Similar to the discussion above regarding actual deception,186 a purchaser need only show that the alleged act had the capacity to deceive a substantial portion of the public.187 This focus on a capacity to deceive rather than intent to deceive helps deter future deceptive conduct, thereby preventing harm to other purchasers.188 Some CPAs, however, require that the seller intended for the horse purchaser to rely on the deceptive act or statement.189 The few states that require reliance generally apply the requirement broadly; thus, in cases in which a pattern of misrepresentations occurs, a court likely would find such a practice deceptive.190 For example, in 1992, in Cronin v. Bacon, the Texas Court of Appeals upheld the jury’s finding that the defendant farm had engaged in deceptive practices by representing on several occasions that the farm had bred the plaintiff’s mare to a particularly well-known stallion, when in fact the farm had bred the mare to a lesser-known stallion.191
Like intent to deceive, most CPAs do not require that sellers know that their statements are false.192 For example, in 1985, in Yost v. Millhouse, the Minnesota Court of Appeals found the defendant horse seller liable even though he did not know his statements were false.193 In Yost, the plaintiff purchased the defendant’s yearling for $400, relying on the defendant’s repeated statements that the horse was registered with the American Quarter Horse Association, when, in fact, unknown to the defendant, the horse was actually not registered.194 Despite lack of evidence that the defendant had intended to deceive the plaintiff, the court found the defendant liable for misrepresentation—which constituted an automatic violation of the CPA—because he continuously represented that he knew that the horse was regis[*PG810]tered without actually having such knowledge.195 Even courts that require knowledge on the part of the seller often apply the requirement broadly; thus, courts will characterize a seller’s definitive statement made without knowledge, such as the seller’s in Yost, as a knowing, false statement.196
Reliance on a seller’s misrepresentation is another factor courts consider in a CPA violation claim.197 Some courts require that a purchaser demonstrate actual reliance on the seller’s misrepresentation, whereas other courts merely consider whether a reasonable person would have relied on the misrepresentation.198 For example, in 1980, in Scholtz v. Sigel, the Texas Court of Appeals implicitly concluded that the trial court could have found that the plaintiff relied on the defendants’ misrepresentation that the horse she purchased from them was good for show purposes.199 The sellers knew the horse had poor bone structure and was not suitable for showing; yet, they induced the plaintiff to purchase the horse by representing that the horse was of a higher quality than it actually was.200 The court implicitly concluded that the purchaser’s reliance on the sellers’ misrepresentations could constitute a violation of the CPA.201
A seller can also deceive a horse purchaser by failing to disclose material facts about a horse.202 Some CPAs expressly prohibit a seller’s failure to disclose such facts, whereas other states find a CPA violation based on the deceptiveness of such a failure.203 For example, in 1990, in Fancher v. Benson, the Supreme Court of Vermont found that the jury could have concluded that the seller’s intentional delay in disclosing the horse’s heart defect to the purchaser violated the state’s CPA because the delay was deceptive.204 Similarly, some courts will find a CPA violation when a seller should have learned of a defect but did not and therefore failed to disclose the defect to the purchaser.205 For example, in 1988, in Travis v. Washington Horse Breeders Ass’n, the [*PG811]Supreme Court of Washington implicitly concluded that, because the auction house never examined sale horses even though examinations were customary in the auction industry, the seller should have known of the colt’s defect by examining it before the sale and should have disclosed the information to the purchaser.206 The court concluded that the failure to routinely inspect horses prior to their sale, while making representations about their ability to race, sufficiently proved that those acts had the capacity to deceive a substantial portion of the public.207
Although some courts find CPA violations when sellers fail to disclose unknown but discoverable defects, other courts do not require sellers to disclose information they do not or should not have known.208 For example, in 1989, in Cohen v. North Ridge Farms, Inc., the United States District Court for the Eastern District of Kentucky concluded that the seller had no duty to discover and disclose any defects in the horse because the horse was sold “as is;” therefore, the seller’s failure to disclose the horse’s respiratory problems was not a misrepresentation.209 Similarly, in 2002, in Hurwitz v. Strain, the Appeals Court of Massachusetts found the defendant not liable under the state’s CPA when a beginner rider died after being thrown from her horse several days after purchasing it from the defendant.210 Although the rider purchased the horse based on the defendant’s assurances of the horse’s mild disposition and suitability for a novice rider, the court concluded that the plaintiff did not establish that at the time of the sale the defendant knew of the horse’s unsuitability for a beginning rider.211 Consequently, the court determined that no violation of the CPA existed.212
Courts consider unfairness to be a broader concept than deception.213 Consequently, if a CPA prohibits unfair practices, and not just deceptive practices, courts generally find most state statutory viola[*PG812]tions to be per se unfair.214 In determining unfairness, courts consider whether a practice is immoral, unethical, oppressive, unscrupulous, unconscionable, offends public policy, or causes substantial injury to consumers.215 In equine sales transactions, courts commonly consider unconscionability issues and public policy concerns when determining the possible unfairness of a practice.216
Many courts characterize a seller’s taking unfair advantage of a purchaser’s inexperience or capacity as unconscionable.217 Courts frequently apply a particularly high standard for unconscionability in equine sales transactions, assuming that most participants in such transactions have significant experience in the equine industry.218 Often, a court hesitates in striking seemingly unfair contractual clauses unless they are clearly unconscionable on their face or violative of public policy.219 For example, in Cohen, the plaintiff argued that his $575,000 purchase of a Thoroughbred yearling, which he later discovered had respiratory problems making the horse unable to race, was unconscionable for failure of consideration.220 In refusing to uphold the claim, the United States District Court for the Eastern District of Kentucky emphasized that the plaintiff had significant experience in the horse business and had gotten exactly what he bargained for: a yearling “as is.”221
Some courts, however, find a practice unconscionable if a gross disparity exists between the value received and the consideration paid.222 For example, in 1990, in Teague v. Bandy, the Texas Court of Appeals found a CPA violation because the plaintiffs purchased an [*PG813]interest in a cow’s future calves for $75,000 but received nothing of value in return for their payment and later learned that the cow could not produce embryos.223 The court found that the purchase was unconscionable because a gross disparity existed between what had been delivered—$75,000—and what had been received—a barren cow.224
Courts may be more willing to consider a practice unfair if the horse purchaser is new to the equine industry and lacks experience in equine sales transactions or if the practice has the capacity to deceive a substantial portion of the public.225 For example, some CPAs require that the practice affect the public interest for a violation to occur.226 Courts hesitate to find that private transactions between a seller and purchaser have the capacity to deceive a large number of people; therefore, in states with a public interest requirement, a purchaser will find it difficult to obtain relief under the state’s CPA.227 Under South Carolina’s Unfair Trade Practices Act, courts require that an unfair or deceptive act or practice have an impact upon the public interest to be actionable; a mere breach of contract will not constitute a violation of the statute.228 For example, in 1993, in Perry v. Green, the South Carolina Court of Appeals found no such impact on the public interest.229 In Perry, the defendant sold the plaintiff a registered Arabian mare for breeding purposes.230 The purchase contract required the defendant to transfer the horse’s registration papers when he received the last payment.231 He refused, however, and then actively thwarted the plaintiff’s attempts to prove full payment and ownership to the Arabian Horse Registry of America, thereby significantly decreasing the value of the horse and its future offspring.232 The court found for the plaintiff on her breach of contract claim, but refused to find a violation of the state’s CPA because it was unlikely the seller would repeat such conduct to the point where it negatively affected the public interest.233
[*PG814] Unlike private transactions between two parties, auctions are particularly susceptible to unfairness claims because they affect the public on a broader scale.234 Consequently, courts often scrutinize auction sales more closely than private transactions.235 For example, in Travis, the Supreme Court of Washington determined whether the seller’s deceptive acts affected the public interest by considering whether repetition of the practice could potentially occur.236 The court concluded that other people could suffer injuries similar to the plaintiff’s because the auction house’s practices were longstanding and therefore unlikely to change.237 The court harbored particular concern about the effect that such practices would have on new purchasers inexperienced with both horse auctions and the equine industry generally.238
Disclaimers of warranties may also raise public policy or unconscionability concerns.239 If such disclaimers are in large, bold type in a printed auction catalog or are legible and easy to read in a purchase contract, courts have enforced the disclaimers.240 Some courts, however, have found it unreasonable to allow disclaimers of express warranties because they are inherently inconsistent with the idea of an express warranty.241 Therefore, in Travis, the court implicitly concluded that disclaimers of express warranties contravened public policy.242
Once a court determines that a horse seller’s actions were deceptive or unfair and therefore constitute a CPA violation, a purchaser can obtain various remedies.243 These remedies vary from state to state, but most horse purchasers seek damages.244 Courts determine damages in a number of ways depending on the CPA.245 Out-of-pocket damages are calculated as the difference between the amount the purchaser paid for the horse and the horse’s actual value.246 Loss-of-bargain damages, which are larger than out-of-pocket damages, are calculated as the difference between what the purchaser expected the horse to be worth and what the horse actually is worth.247 In addition, most CPAs also allow purchasers to receive proximate damages for additional costs related to the CPA violation.248 Moreover, some CPAs award purchasers multiple damages, such as treble damages, to deter future seller misconduct and award the purchaser for pursuing a claim.249 Typically courts interpreting these statutes award multiple damages only in cases in which a plaintiff sustains actual damages and a seller acted willfully or in bad faith.250
Some states also allow punitive damages for CPA claims.251 Like multiple damage awards, courts typically award punitive damages in cases in which the seller acted maliciously, willfully, or with reckless indifference to the interests of others.252 For example, the Supreme Court of Vermont in Fancher upheld a jury award of punitive damages based on the seller’s intentional delay in disclosing the horse’s heart defect to the purchaser, which the court considered deceptive and [*PG816]therefore a violation of Vermont’s CPA.253 The court found sufficient evidence of malice, which the court defined as the use of sharp selling tactics, to support the jury award of punitive damages.254 According to the court, the jury could find such sharp selling tactics based on the following facts: the seller intentionally delayed disclosure, lied to the plaintiff about the medical report’s contents, and deceived the plaintiff’s agent into not immediately notifying the plaintiff of the medical report’s contents.255
Some states occasionally allow damages based on mental anguish; however, most require a showing of physical harm or a high degree of mental pain and distress before doing so.256 For example, in Cronin, the Texas jury awarded $20,000 in damages to the plaintiff for mental anguish under the CPA, based on his extreme anger at the defendant for breeding the plaintiff’s mare to one stallion while representing that she had been bred to another.257 The Texas Court of Appeals overruled the jury award because the plaintiff’s feelings of anger and frustration were not sufficient to recover mental anguish damages.258
Finally, most CPAs allow a successful plaintiff to recover attorney’s fees.259 For example, the court in Cronin upheld the trial court’s award of attorney’s fees because the Texas CPA allowed for reasonable and necessary attorney’s fees.260 Similarly, the Supreme Court of Washington in Travis upheld payment of attorney’s fees for the CPA claim, but it specifically limited the award to only those services related to the CPA cause of action.261
Most people, including many judges, believe that horse owners are wealthy businesspeople with experience in the equine industry.262 [*PG817]A large number of horse purchasers, however, are first-time purchasers, like the Millers in the hypothetical above,263 and therefore are unfamiliar with the equine industry.264 Unlike knowledgeable businesspeople, these novices are particularly susceptible to unfair and deceptive sales practices throughout an equine sales transaction and deserve protection under state law.265 Both the U.C.C. and CPAs provide such protection.266 CPAs, however, provide more protection to deceived, unsophisticated horse purchasers because they have broader, more flexible standards that apply on a case by case basis.267
Obtaining relief under CPAs can be easier than under the U.C.C.268 Relief under either type of statute often depends on the different policies and purposes of the statutes.269 The main purpose of the U.C.C. is to protect the relationship between purchasers and sellers, thereby encouraging freedom of contract.270 Thus, in equine sales disputes, courts typically base their determination of a U.C.C. claim solely on the terms of the contract and assume that both parties were on equal footing during negotiations.271 These assumptions are fair if both parties are sophisticated and experienced in the equine industry and are in equal bargaining positions.272 The same assumptions, however, can prevent unsophisticated horse purchasers, who often know [*PG818]far less about the equine industry than the seller, from receiving relief.273
The purpose of CPAs, unlike the contract-based goals of the U.C.C., is to prevent deception and abuses against consumers in the marketplace.274 Courts considering a CPA claim look for whether the practice at issue had a tendency to mislead even the smallest group of unsophisticated consumers.275 CPAs, therefore, generally protect consumers, whereas the U.C.C. protects commercial transactions and contracts.276 In equine sales disputes, courts usually favor freedom of contract to protecting horse purchasers; thus, U.C.C. claims, which are always contract-specific, often fail.277 Courts can be more sympathetic, however, to horse purchasers who raise CPA claims based on deceptive and unfair practices.278 Therefore, unsophisticated horse purchasers are more likely to obtain relief under a CPA claim than a U.C.C. claim.279 Indeed, even sophisticated horse purchasers can receive relief under a CPA claim in many states, particularly if they can show that the practice at issue had the capacity to deceive unsophisticated purchasers.280
CPAs also protect unsophisticated horse purchasers more thoroughly than the U.C.C. by providing more extensive monetary remedies.281 Although both the U.C.C. and CPAs allow horse purchasers to receive damages for breaches of warranty, CPAs also allow purchasers to recover for the deceptive practice at issue.282 Moreover, most CPAs, [*PG819]unlike the U.C.C., provide recovery of attorney’s fees.283 Consequently, deceived horse purchasers can receive greater monetary remedies under a successful CPA claim than a U.C.C. claim.284
These greater CPA remedies exist to promote important public policy concerns, unlike U.C.C. remedies, which exist to regulate commercial relationships.285 Requiring deceptive horse sellers to pay attorney’s fees encourages purchasers to bring lawsuits when they could not otherwise afford litigation.286 Enabling more lawsuits against deceptive sellers deters sellers from continuing their deceptive practices in the equine industry.287 In addition, awarding attorney’s fees encourages sellers to settle quickly, thereby relieving courts of a drain on resources.288 Thus, awarding attorney’s fees not only achieves the goal of most CPAs by protecting horse purchasers from deception and abuses, but also conserves precious judicial resources.289
Based on these policy considerations, deceived horse purchasers also should obtain relief more easily under CPAs than under the U.C.C. in cases in which they can prove the unconscionability of a transaction.290 Because the U.C.C. favors the contractual relationship between purchaser and seller, courts considering a U.C.C. claim assume that parties to an equine sales transaction are sophisticated and willingly agreed to all the terms of the contract, even those that may seem unfair.291 In contrast, CPAs focus not on the contractual relationship, but instead on whether the practice at issue had the capacity to deceive unsophisticated purchasers.292 Even in private equine sales [*PG820]transactions, courts often find a CPA violation if the practice has the capacity to deceive other horse purchasers.293
Another way CPAs provide more thorough protection for deceived horse purchasers is their more flexible approach to reliance.294 Reliance is both less flexible and more important to a successful claim under the U.C.C. because, under the U.C.C., courts only look at the two parties to the contract and their understanding of its contents.295 For example, the most important element of a breach of implied warranty of fitness for a particular purpose claim under the U.C.C. is the horse purchaser’s reliance on the seller’s judgment in recommending the horse for that particular purpose.296 Although some CPAs apply a similar standard, many do not consider whether the purchaser actually relied on the seller’s misrepresentation but instead only consider whether a reasonable person would have relied on the misrepresentation.297 This view of reliance shifts the focus from the contractual relationship to the deceptive practices that could potentially injure purchasers beyond the purchaser in the case at hand.298 In the equine industry, in which horse sellers usually have knowledge of the abilities and health of their horses, sellers can and do easily take advantage of new horse purchasers unfamiliar with industry practices.299 Even if a new purchaser in one instance does not rely on a deceptive act, allowing that act to go unpunished encourages sellers to deceive other purchasers.300 Consequently, the broader, more flexible interpretation of reliance under the CPA allows for greater deterrence of deceptive practices than does the interpretation of reliance under the U.C.C.301
This flexibility of CPAs emphasizes perhaps the most important advantage of a CPA claim.302 Unlike the U.C.C., which relies on con[*PG821]tract principles, CPA claims rely on the broader concepts of deception and unfairness.303 Contract laws do not apply to CPA claims, so disclaimers or extinguishment of warranties, which prevent relief under the U.C.C., do not prevent relief under a CPA.304 For example, in the hypothetical above, the Millers unwittingly disclaimed all warranties by signing the contract, so they could not sue the seller for breach of warranty under the U.C.C.305 A court could determine, however, that the seller’s statement about Buttercup’s impressive jumping abilities, combined with his failure to disclose the pony’s chronic lameness, was deceptive and therefore violated the state’s CPA.306
Similarly, contract doctrines such as the Statute of Frauds, which often bar U.C.C. claims, do not bar CPA claims.307 Even the examination exception does not apply to CPA claims.308 Knowledge of a custom such as a pre-purchase examination requires experience in the equine industry that many newcomers lack.309 Because the examination exception does not apply under CPAs, CPAs would protect new purchasers more effectively than the U.C.C. in these situations.310 For example, in the hypothetical above, if the Millers had employed a veterinarian prior to the purchase, they likely would have learned of Buttercup’s lameness.311 It is not equitable, however, to punish newcomers to the equine industry while businesspeople such as the seller actively withhold material information regarding the horse’s health.312 Therefore, CPAs protect horse purchasers from such inequities in the equine industry by looking at the level of sophistication of any potential purchaser.313
This consideration of any potential purchaser’s level of sophistication is yet another example of how deceived horse purchasers can [*PG822]obtain superior relief under CPAs than the U.C.C.314 Some states, such as Kentucky, however, do not focus on the level of sophistication of horse purchasers in CPA claims.315 Kentucky’s CPA, which does not apply to the purchase of Thoroughbred horses because they are not considered goods for personal purposes, fails to protect deceived horse purchasers from inequities in the equine industry.316 This view of horse ownership places unsophisticated horse purchasers like the Millers in the same category as the savvy owners of potential sweepstakes winners—professional businesspeople who should know better than to agree to unfavorable contract terms.317 The United States District Court for the Eastern District of Kentucky’s failure to apply Kentucky’s CPA to Thoroughbred sales in Cohen v. North Ridge Farms, Inc. overlooks the general purpose of CPAs—protecting purchasers from marketplace abuses.318 Although the plaintiff in Cohen likely did not deserve protection because he was experienced in the equine industry, the court’s interpretation of the CPA adversely affects unsophisticated horse purchasers.319 If courts in Kentucky are particularly concerned about sophisticated horse purchasers taking advantage of the state’s CPA, the courts could allow CPA claims on a case by case basis, depending on the level of sophistication of the horse purchaser.320 Thus, the experienced horse purchaser in Cohen still would not receive relief, but unsophisticated purchasers like the Millers could, even if they purchased a Thoroughbred.321
The interpretation of Kentucky’s CPA in Cohen is not the only example of limits to CPA claims.322 Like the warranty of merchantability, which only applies to transactions between a merchant and purchaser, some CPAs do not include isolated sales by one-time merchants in the definition of trade or commerce.323 Consequently, in such states, if the seller is a one-time merchant, the purchaser cannot recover under either the CPA or a breach of implied warranty of merchantability.324 The purchaser can potentially recover, however, under the U.C.C. [*PG823]with a breach of express warranty or implied warranty for a particular purpose claim, which do not depend on the seller’s merchant status.325 Most importantly, however, because CPAs vary from state to state, a transaction actionable under one state’s CPA is not necessarily actionable under another state’s CPA.326 Thus, before a deceived horse purchaser files a CPA claim, the purchaser must first determine whether the particular state’s CPA applies.327 These limits demonstrate that there are a small number of instances where U.C.C. claims are better than CPA claims.328 Overall, however, for the various reasons discussed above, CPA claims provide greater protection for unsophisticated horse purchasers whom sellers have deceived.329 Therefore, duped purchasers should always attempt to file a CPA claim against a deceptive horse seller.330
Many horse purchasers, like the Millers, are first-time purchasers with little experience in the equine industry. These unsophisticated horse purchasers often defer to the judgment of a more knowledgeable seller, and thus are highly susceptible to deceptive and unfair sales practices. In situations in which unscrupulous horse sellers take advantage of these purchasers by inducing them to purchase a defective horse, the purchasers often cannot receive relief through contract-based U.C.C. claims. CPA claims, however, address this inequity by providing duped horse purchasers another source of relief that is not dependent on contract principles. Therefore, the flexible standards of CPAs, based on protecting consumers from market inequities, allow unsophisticated horse purchasers to obtain relief even when the U.C.C. does not. Additionally, CPA claims often provide more extensive monetary remedies than U.C.C. claims. Consequently, CPAs can often provide the best avenue of redress for duped horse purchasers saddled with a lame horse.