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What happens if college breaches condition of gift?

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What happens if college breaches condition of gift?

A private 501(c)(3) college accepted a multi-million dollar donation with one restriction: that a current employee remain employed for a minimum of three years. The college accepted the money, spent it, and fired the employee long before the three years was up. Is this legal?

If the gift was conditioned on retaining a certain employee and there was no specific cause for terminating that employee, it sounds as though the college has breached the contract.  Retention of an employee is not a usual type of condition, but is not unheard of and could be important if the employee is critical to the program being funded.  

Assuming a breach of contract, who has the right to enforce it?  Presumably, the donor retained the right to enforce it in the written agreement.  The employee might have been a third party beneficiary under state law and might have a personal enforcement right as well.  The state Attorney General would probably have a right to enforce the contract, but may not have the personnel or the political interest in getting involved.

Even if the donor and the employee don’t have a right to enforce, or don’t want to go to the effort to enforce, they have some leverage if they want to go public with the college’s failure to do what it said it would do.  That is the kind of publicity that can discourage others from giving to the college.  If the donor is in a position to make additional contributions of similar size, the donor obviously has some influence over the situation.

The people concerned with the breach should talk with the college and try to work out a resolution that is satisfactory to them.  If they are unsuccessful, they can then consider their other remedies.

Tuesday, May 15, 2018

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