Payable Upon Sales Stud Fee

[windham]

Looking for some advise from those who know industry protocol:

A friend of mine entered a 'payable upon sales' contract for a stud fee for a well-know (but now deceased) KY stallion. Now the stud farm wants yet another contract signed before they release a stallion service cert. inorder for the owner to reg. the foal. New contract states the JC papers stay in the hands of the stallion farm, get shipped to the sales company when the foal gets consigned.

My question: Is this normal practice under these conditions? Contract one never stated there would be a 2nd contract with further terms. Seems like a scam to me, just unsure how to advise my friend.

Thanks for your help in advance.

[LB]

Every contract is different, and every farm uses a slightly different protocol. Although I, too, would wonder about the need for two contracts. It sounds as though the farm screwed up the first one and is now trying to put in clauses they forgot to mention, which is kind of wierd.

We signed a pay-from-proceeds contract that stipulated that the JC papers were to go to the stud farm and be held by them until the sale of the foal. I didn't have any problem with that--I trust the farm I'm doing business with.

I don't think the conditions are unusual necessarily but I would question the farm's need to change the agreement mid-stream. An unregistered foal does neither stallion nor mare owner any good. Best thing would probably be for your friend to sit down with the stallion owner and see if they can come to a mutually acceptable agreement.

[kimberley mine]

I'm assuming your friend is acting in good faith, and intends to sell the foal AND has it insured for at least the value of the fee should the foal die or something happen that makes it unsellable (e.g. gets kicked in the paddock and turns into a lawn ornament).

I would ask an equine lawyer, and in the meantime, politely tell the stallion farm where to go. Your friend signed a legal and binding contract--which means binding on both sides--and if your friend is acting in good faith and not in any kind of material breach, then the stallion farm would be breaking their side of the agreement by not sending in the service certificate in a timely manner.

But definitely ask a lawyer.

[CS]

Yes, it is standard. The original contract should state that the stallion farm holds all rights to the Stallion Service Certificate - that right would include whether or not to release it for registration. If the stallion farm is going to give up their only real piece of collateral on the yearling, they have to have an assurance that they are protected by giving up that collateral.

[windham]

Thanks for all the great feedback. Each of you have a valid point.

Indeed, 'contract one' is missing the Stallion Service Certificate release details all together.

Wouldn't one think that if this were normal protocol to include something referencing the SSC, that it would have been included. This is a fairly large stallion farm. No excuses! In my friend's defense - this was their first time breeding a TB. Which the stallion farm knew from day one.

My friend's haven't received the 2nd contract in the mail yet, I can't wait to read it.

Can anyone recommend a good equine attorney in KY?

[FOS]

hi windham...hi CS

A friend of mine entered a 'payable upon sales' contract for a stud fee for a well-know (but now deceased) KY stallion. Now the stud farm wants yet another contract signed before they release a stallion service cert. inorder for the owner to reg. the foal. New contract states the JC papers stay in the hands of the stallion farm, get shipped to the sales company when the foal gets consigned.

My question: Is this normal practice under these conditions? Contract one never stated there would be a 2nd contract with further terms. Seems like a scam to me, just unsure how to advise my friend.

For starters...it may make sense to ask the farm for a letter that thoroughly explains, in detail, exactly what they are requesting, and why. If nothing else, you'll have something for your file

It may also make sense to discuss the matter with an attorney (as kimberlymine suggested), one who has genuine in depth knowledge of the industry, breeding contracts, JC Certs of Foal Reg and the registration process, collateral, liens etc etc.

You didn't indicate how much money was involved (stud fee-wise) but I would strongly recommend your friend's rights be protected, and that he/she signs nothing without understanding the ramifications (advantages/disadvantages) of his/her actions. Seems to me...that in and of itself is reason enough for legal counsel.

Yes, it is standard. The original contract should state that the stallion farm holds all rights to the Stallion Service Certificate - that right would include whether or not to release it for registration.

It may be standard at some farms...but don't assume for a second it's standard, or the language is standard, at all farms. It is not.

If the stallion farm is going to give up their only real piece of collateral on the yearling, they have to have an assurance that they are protected by giving up that collateral.

When it comes to collateral it's important to know and understand exactly what's being signed (and the ramifications). Remember too, The Jockey Club Certificate of Foal Registration, in and of itself, is NOT a title to a horse.

In my friend's defense - this was their first time breeding a TB. Which the stallion farm knew from day one.

All the more reason to consult with an attorney.

Best

Respectfully

[windham]

Thank you FOS!

The stud fee is 30k.

[Roguelet]

Can anyone recommend a good equine attorney in KY?

Yes, I can. I sent you a PM.

[madelyn]

Well first of all, it is USUAL practice for the stud certificate to be sent to the Jockey Club and the papers to be issued and sent to the stud farm, in a pay from proceeds contract. This is common practice. However, the stud farm, in RESPONDING to the client's request for a pay from proceeds agreement, and being RESPONSIVE in performing the cover, etc., may have overlooked the clause. The problem might be now that the Jockey Club requires a signed contract for that particular verbage in order to send the papers to the stud farm. Since that was the INTENT of the original contract, and the INTENT of the agreement between the parties, I would say that your friend is just being quite difficult in questioning/refusing to sign this additional piece of paper to accomplish the original goal of the original agreement. I would further add that your friend will be very fortunate indeed to get another consideration, like a pay from proceeds, from this farm in the event your friend hires an attorney, kicks up mud, and messes with this deal.

[Crystal]

How is it being a "complete jerk" when the original contract didn't even mention the foal registration papers or the release of the SSC? I mean thats kind of a big thing to overlook.. registration and all, right?

It sounds like this farm may have more then one inquirry from breeders questioning the contract if they have a hole this large in the contract. It makes me wonder if they modified their contract for the following season.

[drewsbadboy]

I think I would just call the farm and ask why they sent the additional document and see what they say. Maybe there is a logical explanation. Being of a paralegal background I always think it is best to just ask an attorney's opinion before signing any legal document. Best of luck to your friend!

[madelyn]

Sorry, sounded too harsh - really think the client is being difficult. Since it is USUAL and CUSTOMARY for stud farms to have the JC registration papers sent to them in foal share and pay from proceeds contracts, simply because the clause was not in the original contract does not, in my opinion, change the INTENT of the agreement. A client who is going to uphold the original agreement should not have a problem with assigning the registration papers this way. This is, after all, the only security the stud farm will have. The client has a mare in foal. Would the client be better served, at this point, to try to hire an attorney to fight with the stud farm?

[clh]

Why would your friend not just pick up the phone and call the stallion farm's manager/owner or whomever he did business with? I certainly have had no problems continuing to talk to folks that I have done business with at the farms before, during and after my mares have been bred. I think for the most part they may have their questions answered to their satisfaction. I agree with Madelyn however, that the "client" knew the intent of the agreement when it was made. I am quite certain if something had been omitted on your friend's part he would certainly want them to just go ahead and sign off on it if it was part of the verbal agreement, correct? Speaking from experience - equine lawyers can be very, very expensive.

[kimberley mine]

Sorry, sounded too harsh - really think the client is being difficult. Since it is USUAL and CUSTOMARY for stud farms to have the JC registration papers sent to them in foal share and pay from proceeds contracts, simply because the clause was not in the original contract does not, in my opinion, change the INTENT of the agreement. A client who is going to uphold the original agreement should not have a problem with assigning the registration papers this way. This is, after all, the only security the stud farm will have. The client has a mare in foal. Would the client be better served, at this point, to try to hire an attorney to fight with the stud farm?

Speaking as somebody who does contract-type work for a living, I am VERY wary of any party making substantial material changes to a contract. The stallion farm is attempting to make a substantial material change to a contract--something that will affect the execution of the contract (and possibly the value of the horse) later on down the road--and is telling the OP's friend that unless we do what we tell you, we will not uphold our side of the contract that is already signed.

OPF is a self-professed beginner, and Friend's very first contract has a massive big whoopsie in it? This is the part of the map where "Here Be Dragons" is written. Especially when you consider that we're talking about a $30,000 stud fee--which probably means that Friend has a fairly nice mare. Regardless of standard practices or intentions, this is something OPF has zero experience with, there's a lot of money involved, and thus it's only smart to take the time to do things right.

Talk to counsel, make sure you understand everything, and if you don't understand or if the second contract isn't agreeable, don't sign. Getting a lawyer doesn't necessarily mean sueing the stud farm or legal fireworks--like I said earlier, I assumed that the OP's friend was acting in good faith and intends to execute the contract exactly as written. It need not even be more than just an hour or two of consultation. But until the OP's friend is satisfied, don't sign anything, don't verbally agree to sign anything, and don't be anything but absolutely gracious about the whole thing.

[madelyn]

How can having the registration papers sent to the stud farm change the value of the horse?