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Agent Madness – Are you liable?

Most horse people generally know that an agent is supposed to act on behalf of their principal, but few fields of human endeavor encompass agency relationships with the complexity and depths of informality as that of the horse business. This is a situation ripe for disaster.

An agent is someone who acts on another's behalf. This is a legal relationship, strictly defined in the law, and carrying with it certain duties, obligations, and risks. The duty of an agent is to act in the best interest of his principal, and the risk for both is that the agent can bind the principal by his actions to liability, and can also be held personally responsible for those actions, in both civil and criminal contexts. For example, take the tangle of relationships common in the hunter/jumper world and see if you can spot the agent relationships below and the breaches involved.

Example 1: A trainer teaches two young girls who share a half lease on the same horse, owned by one of them. The girls don't agree ahead of time on precedence over the horse in the event of a dispute. The trainer sets up a show schedule and enters the lessee in a particular class. At the last minute, the trainer, under pressure from the owner, yanks the lessee and enters the owner in that class. The trainer, an agent to both girls, has just breached a duty to the lessee.

Example 2: A trainer calls his dealer in Europe to find a likely horse prospect on behalf of a client. The client, excited about the prospect of a new horse, agrees to pay the trainer a sales commission for this service. The client is such a good customer of the trainer that the trainer agrees to let the client get the horse at cost, plus a percentage of the horse if it is resold within the next year, to which the parties agree to put best efforts towards. The client trades the horse to a friend for another horse without telling the trainer. The client, an agent to both friend and trainer, has just breached his fiduciary duty by serving one at the expense of the other.

Example 3: A trainer, getting a percentage of a horse intended for sale, sells the horse to a buyer with which the trainer also had a percentage deal, but did not disclose this relationship to the seller. The trainer has breached his fiduciary duty to the seller.

Avoiding problems boils down to understanding what an agency relationship is, and also in understanding the duties involved. Simply put, an agency relationship creates a fiduciary responsibility between the principal and the agent. An agent has the duty of loyalty, care, and disclosure to the principal in all activities related to the scope of the agency. Further, an agent has a duty of good conduct, defined as a duty not to conduct himself with such impropriety that he brings disrepute upon the principal or upon the business in which he is engaged.

Liability for a breach of this duty may extend to those who intentionally assist an agent to violate their duty to the principal. So, in the example above, if the friend intentionally traded horses in order to save the percentage due the trainer, then the friend might also be liable.

Once an agency relationship is created, even if those with whom the agent deals with are not informed that the agent IS dealing on behalf of someone else, then the principal still can be held to account for what the agent did or said.

If you are an agent or think you may have created an agency relationship with clients in your business dealings, take care to fully disclose all of the circumstances that may affect your ability to act solely on behalf of your principal. If the principal is fully informed of the dual nature of the agency, and chooses to proceed in any event, then you, the agent could be relieved of liability in the future. And of course it goes without saying, avoiding acting in ways that bring "disrepute" to the horse world is always a good idea. Sharp horse traders know that the real value of their word extends beyond any one deal.

Kathleen A. Reagan, Esq. is an equine attorney practicing in Braintree, MA, available at www.kathleenreaganlaw.com, has developed a course in equine law at www.concordlawschool.com, and is co-founder and Vice President of QueryHorse, the largest horse information resource on the Internet.

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