Keeping Promises and Meeting Needs: Public Charities at a Crossroads

Keeping Promises and Meeting Needs: Public Charities at a Crossroads

By Allison Anna Tait. Full text here.

When a charitable institution cannot fulfill the terms governing a gift agreement, it must decide whether to keep a promise or meet a need. If an institution chooses to keep a promise to a donor, it might not be able to use the gift because of restrictions placed on the gift by the donor—a problem with real consequences in times of financial shortfall. If an institution chooses instead to meet the need, it must go to court. Cy pres, the best available option for a charitable institution in such a situation, is a doctrine that allows a court to modify conditions placed on a gift when those conditions have become either impossible or impracticable. The problem is that the definition of impracticability is unclear and sometimes unnecessarily difficult to meet.

This lack of clarity leads to bad outcomes for public charities. For example, if an institution is forced to adhere to donor restrictions, the institution has little budgeting flexibility and, ultimately, outdated donors rules may begin to control the institution instead of the trustees or board members. A stable and consistent framework for evaluating impracticability would therefore benefit not only courts but also the charities themselves. Fortunately, the tools to craft a new standard are within reach, contained in the bodies of contract and property law. Contract informs trust-law rules about keeping promises. Property, on the other hand, informs trust-law rules about meeting needs and putting a managed asset to productive use. When woven together, contract and property can help craft a cy pres doctrine that gracefully balances institutional obligation and need while also providing a new and helpful aperture through which to better understand trust law.