A Loan Agreement is important for horse owners and loaners

For many horse owners, putting a horse out on loan can be an excellent solution. Whether you are short on time, reducing costs, taking a break from riding, or simply wanting the right home for your horse, a loan agreement can be great for everyone involved. 

Equally, many loaners enjoy the opportunity to care for and ride a horse without the long-term commitment and expense of ownership. 

However, whilst loan arrangements often begin with enthusiasm and goodwill, problems can arise when expectations differ or circumstances change. This is why a properly drafted loan agreement is so important. 

Isn't a Verbal Agreement enough? 

Many loan arrangements are made between friends, acquaintances from the yard, or people connected through the equestrian community. Understandably, there can consequently be a reluctance to formalise the arrangement. 

Unfortunately, despite best intentions, problems often arise when memories differ about what was agreed or when situations or problems develop that nobody anticipated. 

A written loan agreement provides clarity and certainty. It records the terms that both parties have agreed and creates a clear reference point should any questions arise in the future. 

Far from suggesting a lack of trust, a loan agreement can actually help to preserve relationships by ensuring everyone understands their responsibilities from the start. 

What should the Loan Agreement cover? 

Every arrangement is different, but a comprehensive loan agreement should address matters such as: 

• The identity of the horse
• The duration of the loan
• Where the horse will be kept
• Permitted use of the horse along with any limitations
• Responsibility for routine costs and veterinary treatment
• Nutritional requirements
• Medical requirements
• Insurance requirements
• Farriery and dental care
• Competition and hunting permissions
• Whether the horse may be moved to another yard
• Arrangements for inspections by the owner
• Termination provisions and notice periods; and 
• Procedures for returning the horse. 

The more clearly these issues are addressed, the less scope there is for misunderstanding. 

The advantages of having a written Loan Agreement: 

1. Clarity and certainty. A well-drafted agreement ensures that both owner and loaner understand exactly what is expected of them. It reduces the risk of disputes arising from differing assumptions or recollections. 

2. Protecting the welfare of the horse. Owners naturally want reassurance that their horse will be cared for appropriately. A loan agreement can set out standards of care, veterinary requirements, feeding arrangements, turnout expectations, and any limitations relating to the horse's health or workload. These provisions help safeguard the horse's welfare throughout the loan period. 

3. Financial protection. Disputes frequently arise over money. Who pays veterinary bills? What happens if the horse requires emergency treatment? Who is responsible for insurance premiums? What if the horse damages property or causes injury? A written agreement can allocate responsibility clearly and reduce the likelihood of costly disagreements.  

4. Managing risk. Horses are unpredictable animals and accidents can happen despite the best care. A loan agreement allows the parties to consider risks in advance and agree how certain situations will be handled. This can be particularly important where there are significant veterinary costs, competition activities, transportation arrangements, or liability concerns. 

5. Easier resolution of disputes. If a disagreement does occur, a written agreement provides valuable evidence of the parties' intentions. Without one, disputes often become difficult and expensive exercises in determining who said what and when. A clear written contract can significantly strengthen a party's position and may assist in resolving matters more quickly and cost-effectively.   

The disadvantages of not having a Loan Agreement: 

1. Uncertainty over responsibilities. One of the most common problems is uncertainty regarding financial obligations. Owners may assume the loaner will cover all expenses, whilst the loaner may believe certain costs remain the owner's responsibility. Without a written agreement, these disagreements can escalate quickly.   

2. Disputes about veterinary treatment. Emergency veterinary situations can create difficult decisions. Questions often arise regarding treatment authorisation, financial responsibility, and what should happen if significant veterinary intervention becomes necessary. Without clear contractual provisions, these situations can become stressful for everyone involved.  

3. Disagreements about use of the horse. Owners may discover that the horse is being used in a way they never intended, such as competing at a higher level, hunting, breeding, sub-loaning, or being moved to another location. Without clear written restrictions, disputes can arise over what was actually agreed. 

4. Damage to relationships. Many equine disputes begin between people who initially had a positive relationship. When there is no written agreement, misunderstandings can become personal. What starts as a simple disagreement about costs or management can quickly damage friendships and professional relationships.   

5. Difficulties recovering the horse. Many owners assume that because they legally own the horse, they can simply collect it whenever they wish. In reality, matters can become more complicated where there is disagreement about the terms of the arrangement or allegations that one party has breached the agreement. A properly drafted contract can provide clear mechanisms for termination and return of the horse.   

Why it is important to have a Loan Agreement in place 

Trust is important, but even the most trustworthy people cannot predict future circumstances. Illness, financial difficulties, changes in employment, family commitments, yard closures, and unexpected veterinary issues can all affect a loan arrangement. A loan agreement is not a sign of distrust, it is a sensible risk-management tool that protects both parties and, more importantly, the horse. 

Putting a horse out on loan can be a positive and rewarding arrangement for everyone involved. However, relying on informal discussions or verbal agreements can expose both owners and loaners to unnecessary risk. Investing time in documenting the arrangement at the outset is almost always easier, cheaper, and less stressful than trying to resolve a dispute after problems have developed. 

As with any legal document, the agreement should be tailored to the specific circumstances of the horse and the parties involved. Obtaining legal advice at the outset can help ensure that the arrangement is properly documented and that everyone starts the loan with confidence and peace of mind.

Leanne Kitson, a Solicitor in the Dispute Resolution team at Crombie Wilkinson Solicitors who specialises in equine dispute law, can help and advise you on a Loan Agreement between horse owner and loaner.