On July 16, 2003, at approximately 0630 mountain daylight time, an Aerostar RX-8 balloon, N35965, was substantially damaged when it collided with another Aerostar S-71A balloon, N5047C, near Snowmass Village, Colorado. The commercial pilot and his two passengers aboard N35965, and the commercial pilot and his six passengers aboard N5047C were not injured. Visual meteorological conditions prevailed. Both flights were being conducted under the provisions of Title 14 CFR Part 91. No flight plan had been filed for the local flights that originated at approximately 0610. According to both pilots, balloon #1, N35965 (a 90,000 cubic foot balloon), departed from Snowmass Village approximately 1 to 2 minutes after balloon #2, N5047C (a 175,000 cubic foot balloon). Both balloons proceeded down the "Brush Creek Valley floor at an altitude of 10 feet to 100 feet agl." Balloon #2 had proceeded slightly west of the creek bed. Approximately 1 mile down the creek bed, #1 passed #2. Two miles further down the creek bed, #2 had obtained a faster ground speed and began to close in on balloon #1. Verbal contact was established between the two balloon pilots, noting the variance in speed and direction of travel. The pilot of balloon #2 initiated an accent to climb up and over balloon #1. The pilot of balloon #1 attempted to maintain level flight to allow balloon #2 to pass clear. The basket of balloon #2 impacted the envelope of balloon #1 approximately 20 feet down from the top of the balloon. The pilot and passengers of balloon #2 attempted to push balloon #1 away. Balloon #2 continued to climb and the basket snagged the envelope of balloon #1, tearing the balloon envelope. The pilot of balloon #2 was able to separate the envelope from the basket and continue to climb. The pilot of balloon #1 made a forced landing and the pilot of balloon #2 continued flight for approximately 1 mile. Both balloons landed without further incident. According to CFR Part 91, Chapter 113, (b) "When a rule of this section gives another aircraft the right-of-way, the pilot shall give way to that aircraft and may not pass over, under or ahead of it unless well clear." (f) "Overtaking. Each aircraft that is being overtaken has the right-of-way..."