In my last blog, I shared with you a basic overview of how the risk of loss passes from a “Merchant” Seller to the Buyer in a horse purchase transaction. As promised, this blog will outline how the risk of loss passes to the Buyer when the Seller is NOT a “Merchant.”

To review, as a general rule, when the Seller is a Merchant, if the Buyer has taken possession of the horse then risk of loss passed to the Buyer. Simple, right! Well, maybe not, but compared to understanding risk of loss when the Seller is not a Merchant, it’s a piece of cake. But don’t despair! That’s why I am here to help answer your questions.

When the Seller is not a Merchant (See the prior blog for determining if the Seller is a Merchant under Oklahoma law), the concept of “tender” becomes important. By “tender”, I don’t mean gentleness or showing compassion. In the context of horse sales, “tender” has a legal meaning. For example, if you, as a Seller, have “tendered delivery,” it means you have set aside a certain horse for a Buyer to purchase, and you gave the Buyer notice to take delivery. That’s clear as mud, wouldn’t you agree? Let’s do an example…

Suppose you own horses but do not usually sell to others, and therefore, you are not a “Merchant.” Your neighbor comes to you and wants to buy one of your horses, and to be neighborly, you agree. You both agree as to a particular horse, and the Buyer, your neighbor, is to pick it up in her own vehicle when she gets back from vacation. A few days after the contract (a written one of course!) is made, but before your neighbor has come to pick up the horse, the horse dies from a bout of colic. Who has the risk of loss?

Now remember, under previous Oklahoma law, risk of loss passes to the Buyer when the contract is made because “title has passed.” But now for risk of loss to pass from a non-Merchant seller to a Buyer you need more than title passing, you must also have “proper tender.” So in our example above, you, the Seller, put a certain horse aside for the Buyer to purchase, and the Buyer had notice because you both agreed to not only the horse to be purchased but also decided the Buyer could pick up the horse after she got back from vacation. Therefore, it appears that the risk of loss has passed to the Buyer and you, the Seller, have rights under contract even though the horse died from colic.

In our example, the result would be the same under the old Oklahoma law and the current law. But what if you had agreed to deliver the horse to the Buyer when she got back from vacation? If you agreed to deliver the horse after the Buyer got home from vacation, tender would not be effective until the horse reached its new home! So, if you had agreed to deliver the horse to the Buyer and the horse died from colic before you could deliver it, the risk of loss is on you, the Seller!

As I’ve illustrated in the last two-blog posts, risk of loss is a tricky, complex concept! While I have shared the general rules of risk of loss, there are exceptions. If you are thinking of selling one of your horses, seek the advice of an attorney who will be in the best position to assist you based on your unique situation.