Are Pledges Binding?

March 6, 2012 Posted by The Law Firm for Non-Profits, P.C. in Donations, Fundraising, News

We are frequently asked whether pledges are binding. In California, for the most part the answer is no. In some other states, pledges can be binding as a matter of law.

A pledge is a promise made by a donor to make a charitable contribution in the future. Even when in writing, pledges are typically not enforceable in California. To enforce a pledge, California courts look for evidence that the charity specifically relied on the pledge or that the charity provided something in return for the pledge.

There is some precedent for when a pledge agreement will be binding in California. For example, California courts have held that if a charity agrees to name a new building after a donor who has made a pledge, that is probably sufficient to enforce the pledge.

California courts are also more likely to enforce pledge agreements where multiple promises by multiple donors are made at the same time. In other words, if you make a pledge only because all of your friends do the same, that will likely be binding on both you and your friends.

Regardless of whether a pledge is binding, occasionally a pledgor will seek to have his or her pledge cancelled. Charities that solicit pledges should develop policies regarding cancellation or forgiveness of pledge obligations to deal with such situations.

The bottom line is that the more carefully drafted a pledge agreement, the greater the likelihood that the charity will be able to enforce it.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits,1812 W Burbank Blvd, #7445, Burbank, CA 91506

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