Gerard's, an events promoter and coordinator, promises to stage a concert for the benefit of kids care, a charitable organization dedicated to helping disadvantaged youth. In reliance on the...

Gerard's, an events promoter and coordinator, promises to stage a concert for the benefit of kids care, a charitable organization dedicated to helping disadvantaged youth. In reliance on the anticipated receipts, kids care contracts for the construction of a residence for homeless teens. After the concert, Gerard tells kids care that he has decided not to donate the receipts to the organization. Is Gerard's promise enforceable despite the consideration?

Asked on by berty63

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M.P. Ossa | College Teacher | (Level 1) Distinguished Educator

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A charitable pledge, varying from state to state in degrees of enforceability, still is thought of as a contract in terms of the following:

  • offer
  • acceptance
  • consideration

However, here is the determinant of enforceability: written documentation. If Gerard, the events promoter, does not have in writing that he is making a pledge on behalf of the kids' program it is his word against theirs. This is how these pledges are dealt with.

First, a lawyer would look at the offer itself: it should be unconditional but, if there is a condition, it MUST be stated in writing so that both parts can fulfill what is expected of them.

The acceptance is the second determinant, and a lawyer would look for signatures that declare the donation official. If the donor dies before the pledge is given, the pledge is revoked unconditionally unless it has been accepted in writing.

The third factor, consideration, is any good or service that will be conferred from one institution to another. When it is put in writing, consideration is easier to prove and then much easier to enforce. This is because, once there is clear consideration, the offer is legally-bound.

Now- the law changes from state to state. Also, there is no "official" policy with exact vocabulary that specifies when pledges are biding in the Code of Ethical Principles and Standards of Professional Practice. This is mainly because most of the philanthropic organizations abide by the ethical behavior of fulfilling what they promise to do.

In this case, and this DOES go in a case-by-case basis as this is rare, the organization that failed to get the donation can appeal to the Financial Accounting Standards Board (FASB) which is the place where all organizations must report pledges and donations. According to FASB, a pledge can be either verbal (oral) or written. This office keeps track of both, the pledge as well as the money itself. Their job is to protect the charitable organization and enforce the pledges. Wherever a pledge is not fulfilled, the charity has to write off whatever was not paid to them and report it to the FASB. The charity in your scenario obviously will have significant loses due to their contracting of the people for the new building. Hence, what happens next is that the FASB will provide all the grounds to produce a lawsuit that will make the donors do as they said that they would.

Historically, charities do not like to go after donors who break their pledges for fear of looking money-hungry. However, the Ethical Board, as well as the Financial Board do not take pledges lightly; a pledge is a word of honor: a move that involves the name, the brand, and the philosophy of the donor. To rescind from a promise is to put the entire name of the corporation in danger. Plus, the pressure that the FASB will put the donors under is not worth removing themselves from it. The solution to all of this is to put the consideration in writing, draw affidavits, and submitting to the full extent of the state's business laws.

Included in your answer are two wonderful articles that will provide you with more historical examples of when this has happened.

Sources:

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