Charitable contributions are often utilized in estate planning to assist a client not only in supporting his or her favorite charities but also to reduce tax liabilities both during life and at death. However, before clients agree to make any charitable contributions, they should understand that the agreements between themselves and charitable organizations, such as pledge agreements, can be binding.

Historically, New York courts have favored enforcing charitable pledges as a matter of public policy and in doing so, courts have relied on three common law contract law theories: (1) unilateral contract, (2) bilateral contract, and (3) promissory estoppel.^[1]

Courts have most frequently relied on the theory of unilateral contract to enforce charitable pledges.^[2] Under that theory, a charitable pledge or promise to make a future gift constitutes a unilateral offer, and “when accepted by the donee charity by the incurring of liability or detriment . . . [the offer] ripens into a binding contractual obligation of the donor and [is] enforceable against him.”^[3] There have been numerous cases in which a donor’s promise to make a charitable contribution has been enforced on this ground.

For instance, in Woodmere Academy v. Steinberg, a donor made a written inter vivos pledge to pay $375,000 to Woodmere Academy, a school on Long Island, over the course of three years.^[4] By the date on which the funds were due, the donor had contributed $175,000 of the pledge and agreed to pay the remaining $200,000 within the next year. In reliance on the donor’s initial and subsequent promises, the school built a library and named it after the donor’s wife. The donor later failed to pay the final $200,000 payment, and the school sued to enforce the pledge agreement. The New York County Supreme Court ultimately determined that the parties had entered into an enforceable unilateral contract and granted summary judgment to the school. In its opinion, the court explained that “[o]ur courts have definitely ruled that such subscriptions are enforceable on the ground that they constitute an offer of a unilateral contract which, when accepted by the charity by incurring liability in reliance thereon, becomes a binding obligation.”^[5]

Courts have also relied on theories of bilateral contract and promissory estoppel to enforce charitable pledges. In cases involving bilateral contracts, courts have relied on traditional elements of contract formation and have found that bargained-for-exchanges exist even when a charity’s “consideration” is implied. For example, in Allegheny College v. National Chautauqua County Bank, the court determined that an enforceable bilateral contract was created when Allegheny College accepted a pledge from a decedent during her lifetime that was contingent on a scholarship being created in her honor; agreeing to name a scholarship in the decedent’s honor constituted sufficient consideration.[6] In situations in which a charity does not give sufficient consideration, charities may also rely on promissory estoppel in an effort to enforce the pledge. In doing so, the charity must show that it acted in reliance on the promises of a donor and the charity must suffer damages if the promise is not enforced. Pursuing enforcement of a promise through promissory estoppel tends to be a charity’s last resort if it cannot prove existence of a unilateral or bilateral contract.

Considering the many theories under which charities can enforce charitable pledges and New York Courts’ tendency to uphold charitable pledges as a matter of public policy, clients should consult with their estate planning attorney before entering into any charitable pledge agreement and have their attorney review any such agreement. Doing so will help ensure that any lifetime and testamentary charitable goals are honored and charitable intentions are respected.

FOOTNOTES 

[1] Spencer L. Reames, In re Kramer and the Enforceability of Charitable Pledges, 47 N.Y. St. B. Ass’n. Tr. & Est. L. Sec. Newsl., no. 3, Fall 2014 at 18.

[2] Id.

[3] In re Kramer, 30 N.Y.S.3d 903, 904 (2d Dep’t 2016), citing, Matter of Field, 11 Misc. 2d 427, 429 (Surr Ct. Suffolk Cnty. 1958).

[4] 385 N.Y.S.2d 549 (1st Dep’t 1976), aff’d 41 N.Y.S.2d 746 (N.Y. App. Div. 1977).

[5] Id. at 552, citing, I. & I. Holding Corp. v. Gainsburg 276 N.Y. 427, 433 (1938)).

[6] 246 N.Y. 369 (1927).