Module 2: Legal Aspects of
Associations & Non-Profits
Presented by the
Southern Early Childhood Association
Topics to be Presented….
• Legal aspects of association names
• Association “Statement of Purpose”
• Legal contracts (formation, enforcement,
settling disputes)
• Record retention policies
• Association risk-management plans
Your association’s name should…
• Accurately reflect the nature and purposes
of your organization
• Protect the reputation of your association
• Avoid confusion with another organization
• Have a clear and concise acronym
A statement of purpose is a general statement
describing the reasons for which an association
was formed and its intentions for the future.
Examples of common purpose statements:
• To promote the welfare of a group of members
• To deal by lawful means with common problems
or concerns
• To act as an advocate before government bodies
Two main guidelines for writing (or revising)
your association’s Statement of Purpose:
• Because a Statement of Purpose can restrict an
association’s operations, the statement is best kept
more general than specific.
• An association’s Statement of Purpose should
announce the organization’s intention to act
consistently with its non-profit tax-exempt status
and to observe all laws and regulations.
* DISCUSSION *
• Are your association’s legal name and Statement
of Purpose written in the manner that best protects
your organization?
• Which aspects of the association name and
Statement of Purpose are especially helpful to
your organization, and which could you improve
upon?
• How does your organization require that such
significant changes be made, and who has the
authority to make them?
Legal Contracts
Contract: a voluntary understanding between
two parties that creates a binding
relationship between them
As a result of a contract, each party has
obligations and expects something in return.
Three essential elements of a contract:
• An offer by one party to take action or
perform a service
• An acceptance by a second party to receive
that service
• Consideration, or “payment” of some type
for the service
Your association may enter into a contract
when…
•
•
•
•
•
•
Renting or buying office space
Purchasing office equipment or supplies
Arranging for meetings or conventions
Booking speakers or panelists
Buying insurance
Hiring accountants, authors, attorneys,
researchers, or other consultants for the
association’s use
• Employing association staff and executives
* DISCUSSION *
In what types of legal contracts does
your association participate?
Guidelines for Forming Legal Contracts
1.
2.
3.
4.
5.
Authority
Legality
Jurisdiction
Assignment
Modification
Five Common Contract Mistakes
(and How to Avoid Them!)
1.
2.
3.
4.
5.
Failure to negotiate provisions
Failure to understand all provisions
Lack of specificity
Lack of deadlines and penalties
Failure to require parallel liability
clauses
* DISCUSSION *
How much attention does your association
pay to the terms of a contract? Be
specific, and answer for the following
types of contracts:
a) Employment contracts
b) Hotel and facility contracts
c) Office management contracts
Guidelines for Contract Disputes…
1. Written words reign supreme!
2. Use of outside sources to alleviate
confusion
3. Court has more power with a verbal
contract
4. $500, 1+ years
5. Damages
Characteristics to Look for When
Choosing Legal Counsel
• Legal competence
• Ability to work productively with
association staff and officers
• Fees within the price range of the
association
• Knowledge to protect the association
against potential liability
Guidelines for Record Retention
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•
•
•
•
•
State Laws
IRS requirements
“Permanent” documents
7 years
Contracts, deeds, and insurance certificates
Member access?
* DISCUSSION *
What is your association’s policy for
managing its records? Be sure to discuss
record creation, retention, and destruction,
as well as the determination of who has
access to association records.
Three Steps to Developing a
Risk-Management Plan
Step One: Identify the Risks
a) Review types and experience levels of
volunteers
b) Review standard of care and legal duties
likely to be imposed on your association
c) Review your premises, location, staff, and
typical association activities
Three Steps to Developing a
Risk-Management Plan
Step Two: Assess the Risks
a) What risks can your organization tolerate?
b) What risks can you control?
c) Which risks are too great to bear?
Three Steps to Developing a
Risk-Management Plan
Step Three: Control the Risks
a) Avoid risks that are too great to bear
b) Modify policies, plans and procedures to
reduce risks
c) Transfer risks to others through insurance
or legal agreements
d) Implement a volunteer management
program to reduce liability
* DISCUSSION *
Based on the three steps of the riskmanagement plan that have just been
outlined, what should your association’s
risk-management plan look like?
Resources consulted for this presentation:
• Jerald Jacobs. Association Law Handbook. 3rd Edition.
Washington, DC: American Society of Association
Executives, 1996.
• “Contracts, Contracts, Contracts: Five Common Mistakes
to Avoid.” Pfau Englund Nonprofit Law, Alexandria, VA.
www.nonprofitlaw.com © 2003.
• “NONPROFIT 101: Legal or Liable, Like It Or Not.” Pfau
Englund Nonprofit Law, 2003.
Any final thoughts or questions?