Option agreement: to buy horse or pony
This option agreement binds the owner of a horse or a pony to a future sale if the prospective buyer decides to buy. It is used where a prospective buyer is seriously interested in buying, but wishes to wait before agreeing to buy. The prospective buyer pays the seller to be given the right to buy at a later date when he has better information about the value of the horse.
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About this option agreement
This agreement gives a prospective buyer the right to buy a horse (or an interest in a horse) from the owner. The contract binds the owner to sell to the buyer at an agreed price, if the buyer decides he wishes to exercise his option and buy. Just like any standard option agreement, the prospective buyer pays the owner now for the right, whether he exercises it or not, and the right is granted for a limited time period.
Option agreements are a useful way to manage risks relating to the value of horses.
When to use an option agreement
A prospective buyer uses an option when he is interested in buying the horse, but a future event will influence the value of the horse considerably. The advantages to the buyer of buying an option are:
- if priced correctly, the buyer can limit his losses if the event does not change the value of the horse favourably;
- since the contract creates an exclusive right to buy before the end of the period, the buyer can prevent other prospective buyers from purchasing the horse until he has decided whether or not he wants to do so;
- if priced correctly, the buyer can pay less in total for the horse than he would do if he bought after the event has occurred as a result of being willing to take on the risk that the value may not increase.
The advantage to the seller is that if he thinks that the value of the horse will not increase during the option period (or if he thinks there may not be many buyers in the future), he guarantees himself a payment now for granting the option, and still has a good chance that he will sell the horse.
You might use an option agreement when you are buying a horse:
- before you have had the opportunity to ride it and properly assess its suitability for you;
- before an event or race in which you expect it to do well;
- before a vet has confirmed that it is in foal to a certain stallion;
- before the results of a veterinary or drug test have been released.
Since there are advantages for both the prospective buyer and the seller in using an option agreement, either side could adapt this agreement to suit them. It is an easy contract to edit to your needs.
Document features and contents
The agreement includes the following provisions:
- Particulars of the transaction;
- The agreement;
- After notice of exercise: what will happen if the buyer decides to buy;
- If the buyer fails to pay;
- Warranties of the seller: representations that the horse is sound, and optionally that it is in foal, or that it has not been given drugs;
- Completion of documents: allows the buyer to transfer ownership without needing the involvement of the seller;
- Other miscellaneous matters to protect your interest.
Additionally, there are 2 schedules to the agreement that contain details about the horse and the documents relating to the horse.
This document was written by a solicitor for Net Lawman. It complies with current New Zealand law.
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