Are Pledges Legally Enforceable?

Yes, in some cases, a court rules.

Church Finance Today

Are Pledges Legally Enforceable?

Yes, in some cases, a court rules.

Temple Beth Am v. Tanenbaum, 789 N.Y.S.2d 658 (Dist. Ct. 2004)

Background. A synagogue’s members were assessed annual “dues” payable in three equal installments. A member of the congregation (Nathan) submitted a letter to the rabbi in August stating that he was resigning as a member. A month later, the synagogue’s finance chairman sent Nathan a letter requesting that he remit the remaining $1,200 of membership dues that he owed for the balance of the year. The letter explained, “As a temple, we budgeted our expenses based upon your membership. While you benefited from our services when you were a member, your resignation did not relieve you of your financial obligation. We are in need of the balance of your membership dues.”

The issue. Are pledges made by members of a religious organization legally enforceable?

The court’s ruling. The court admitted that “there exists a paucity of law on the issue of a member of a church or congregation’s liability for dues,” but it concluded that “a review of the authorities would indicate that the trend of judicial decision during the last century has been towards the enforcement of charitable pledges almost as a matter of public policy.”

The court conceded that pledges, like any promise, generally are not legally enforceable unless the person making the pledge receives something of value (called “consideration”) in return. But there are exceptions to this requirement, and one of them is “detrimental reliance.” According to this exception, if a charity relies to its detriment upon the pledges of members, then those pledges are enforceable even though not supported by consideration in a traditional sense. The court applied this principle to pledges made to the synagogue:

In many of the cited cases it is difficult to ascertain the precise theory relied upon to sustain the charitable subscriptions or pledges but the end result has invariably been the same. Sound public policy would appear to dictate these results and this court is in agreement with the efforts made to sustain charitable pledges by our courts. The philanthropic work carried on by organized charities, made possible through voluntary subscriptions, is a distinguishing and distinguished feature of our free society. It is a demonstration of the human sympathy, mercy, consideration and good will borne by those more fortunately endowed towards their less fortunate fellowmen. The agreed facts submitted in the case at bar establish that the temple entered into contracts and incurred liability in reliance upon the pledge made by Nathan and others.

[This result] is supported by law and the financial situation presented in the letter of [the finance chairman] that the temple budgets its expenses based upon the membership of the organization. Thus, Nathan became legally bound to pay the full dues when billed. As a member of the congregation he voluntarily submitted to the temple’s rules and dues requirements. Since the temple relies upon persons’ membership as of the time of budgeting, and the dues being billed, Nathan is estopped from refusing to pay the dues.

The court also suggested that members of the congregation did receive valuable consideration in exchange for their pledges, such as worship services, and this constituted “consideration” making the members’ pledges legally enforceable.

Relevance to church treasurers. Obviously, few churches would consider suing a member to enforce a pledge. But, the principle of “detrimental reliance” may be helpful in some cases in getting members to honor their pledges. Knowing that a pledge generally is viewed as legally enforceable by the courts if a charity has taken action in reliance on the pledge may be helpful. Church leaders could use this information as “moral leverage” in getting members to honor their commitments. After all, if a church has made commitments or otherwise acted to its detriment in reliance on a pledge (e.g., launching a construction program, purchasing materials or equipment), and the courts would recognize the church’s reliance on the pledges as a legal basis for enforcing them, then surely such reliance provides a moral basis for doing so that may persuade donors to honor their pledges.

This article first appeared in Church Treasurer Alert, October 2005.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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