February 2012
For What It's Worth

Buyer Beware:

In Livestock Transactions Consider Your Expectations and Protect Your Interests on Paper

Let me begin this article by saying I am not a lawyer, have no legal training and, therefore, am about to share what are merely suggestions and ideas. There are times during the course of a livestock transaction when promises are made, expectations fail to evolve or a deal goes bad for one reason or another. When it comes to buying and selling livestock these exchanges are called transactions. One person is selling a commodity and another person is buying; this transaction can involve the payments of cash, bartering, promissory notes or various kinds of financial exchanges. It can involve one animal, multiple animals or even breeding services. Transactions can occur verbally or with a written contract of some kind — never assume anything. Too often during the course of these transactions there are assumptions made with no documentation and one or both parties may experience dissatisfaction or financial losses following the initial transaction. My reason for writing this article is to help buyers and sellers consider their expectations during the course of a transaction and determine what they want on paper to protect their interests. If you wish to pursue legal opinions, there are lawyers for hire, numerous titles and sections in the Alabama Legal Code which address livestock (much of which says no implied warranty) and Alabama Farmers Federation offers a publication called "Ag Law and You." However, the efforts to obtain any type of settlement may far outweigh the actual monetary gains.

At this point, let me share three familiar phrases: (1) let the buyer beware, (2) as is and (3) assume nothing. When it comes to buying and selling animals, these are three phrases to remember. Sometimes inferences or assumptions are made with no clarification or verification, and both parties can end up dissatisfied. Unless there is a written agreement with specific statements made by the seller, the buyer generally has little or no recourse. It all goes back to Alabama Legal Code statement of "no implied warranty," and the three previous mentioned phrases. Without documentation, it is all "hearsay" or "he said, she said." If there is a written contract or multiple witnesses involved, then legal recourse may be an option in the form of small claims court, legal counsel to better determine legal recourse and possibility of lawsuits.

From the buyer’s perspective, a sales contract/receipt should list specifics including any guarantees of livestock being acquired; if they are being delivered and a delivery date, whether the brood animal is bred and options if not, and other relevant information to the situation. From a seller’s perspective, a sales contract/receipt should list the price paid and whether it is cash, check (check #), credit card or barter, any guarantees on livestock (like health status, bred or as is), who is responsible for animal/s once they leave the farm, contact information and any other relevant information. While the information may be similar, its role varies from the perspective.

Without any documentation or specifics, both parties can be vulnerable and susceptible to false statements or assumptions. If nothing else, a receipt benefits both parties for tax purposes because it (1) provides the seller with proof of income from sales and (2) proof of purchase for buyer as an investment. Without a "paper trail," both parties are left vulnerable if ever audited by a federal tax agency, neither party has verification of the transaction occurring or promises made, and neither party has legal protection or recourse should something go awry following the transaction.

In order for a buyer or seller to protect their best interests, some type of written contract can be the best form of legal protection for both parties. It is in the best interest of each party to protect their own interests. A sales contract can be drafted by legal counsel or simply by the buyer or seller and can be complex or simple as necessary. It can be as practical as a bill of sale which states the two parties, addresses, date, items, quantities, unit price, total price, terms and conditions, and signatures. Commodity contracts are used for all type of livestock transactions and services. Whether it is a formal contract or a simple bill of sale, documentation can protect the interest of both parties, but requires the signatures of all parties involved. In the future, for each and every livestock transaction, and for the sake of both parties "piece of mind" and protection, please utilize some type of contract or receipt mutually beneficial for both parties!

Robert Spencer is an Urban Regional Extension Specialist with the Alabama Cooperative Extension System.