While non-profit organizations and charities are appreciative of every donation they receive, many rely on the pledges of wealthy individuals and businesses to fund their projects – for example, new buildings. They often depend on regular monthly or annual gifts to make plans for the future
So what happens if a donor refuses to make good on a significant pledge they made to you? Can you take legal action to collect that money?
Some of these cases have gone through the court system. One even made it to the Florida Supreme Court. Often, legal action is taken against the estate of the person who passed away after the money was pledged or if the donation was part of the estate plan. In some cases, the would-be donor is still alive but not making good on the pledge for some reason.
When is a pledge considered legally binding?
So what factors are considered when determining if a pledge is legally binding? Two factors can make it legally binding. One – the pledge was for a specific purpose (for example, buying a new facility or doing work to expand and upgrade an existing facility). Two – the organization has already incurred expenses based on that pledge. For example, they already made a downpayment on that new facility or began work on the expansion of their current facility.
In the case that made it to Florida’s high court, a Miami hospital sued the estate of a decedent who had pledged $80,000 to it. The court ruled against the hospital because the pledge didn’t meet either of those criteria. Therefore, it was considered merely a promise and therefore not enforceable.
In other court cases, pledges were determined to be binding based on other factors. For example, did that pledge in question result in pledges from other donors? Did the donor have a condition for how their pledge was to be used?
If a non-profit organization believes it has grounds to take collection action for a large pledge that it was depending on and didn’t receive, a good first step is to seek legal guidance. This will help better determine your rights and potential options.