As mentioned in my earlier blog post, in Oklahoma, selling horses is governed by statute and is considered a “sale of goods.” You may ask why does that matter? Well, it can matter for a number of reasons, but for the purposes of this blog post, it matters because risk of loss is treated differently when the seller of the horse is a “merchant” rather than when the seller of the horse is not a “merchant.”
If you are going to sell a horse in Oklahoma and are concerned about risk of loss before the buyer takes possession of the horse, you first must determine if you are a “merchant” as defined by Oklahoma statute. According to Oklahoma law (12A Okla. Stat. § 2-104), a merchant is: “a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.”
So you may ask, what does that mean? Simply put, if you are a breeder (Like me, I’m a Morgan Horse breeder.); or if you have special knowledge about horses because of what you do for a living (horse trainer, riding instructor, etc.); or if you hire someone with special knowledge about horses to sell your horse then you are most likely a merchant under the laws of Oklahoma and risk of loss passes differently when you sell a horse.
To illustrate, let’s suppose you sell a horse and are a “merchant” under the laws of Oklahoma, does the risk of law pass to the buyer when title to the horse passes? Not necessarily. It used to be in Oklahoma that risk of loss passed to the buyer when the contract was made, written or oral, even when payment and delivery were postponed. BUT NOT ANYMORE! Now, in Oklahoma, the only question is, “has the horse been delivered to the buyer?” Generally speaking, if the buyer has taken possession of the horse then risk of loss passed to the buyer. There are exceptions to risk of loss shifting to the buyer on delivery but I will save that for another blog post!
You might ask, “how can a merchant seller protect his or herself if delivery to the buyer is delayed?” Well, Oklahoma law allows for the seller and buyer to negotiate terms to include passing risk of loss. While you could technically do this with an oral agreement, I would highly recommend reducing the agreed terms to writing. It is much easier to prove that risk of loss passed to the buyer before delivery if you actually have it in writing!
I recommend seeking the advice of an attorney, as risk of loss can be very complex even if you have a written agreement!
But what if you sell a horse to your neighbor and you are not a merchant under the laws of Oklahoma? Tune into my next blog!