Salsbury v. Northwestern Bell Tel. Co.

221 N.W.2d 609 (Iowa 1974)

 

RULE:

Charitable subscriptions are desirable but enforceable only upon a showing of consideration sufficient for contractual liability; it is presupposed that the promise is made as a gift and not in return for consideration.  However, where a subscription is unequivocal, a pledgor should be made to keep its promise.

FACTS:

Plaintiff trustee undertook to establish a city college and utilized a professional fundraiser to solicit subscriptions for the funding. An employee of defendant corporation negotiated with the fundraiser for defendant’s charitable subscription. Since the employee was not authorized to sign a pledge form, he submitted a letter to the fundraiser evidencing defendant’s subscription upon approval. Subsequently, the city college failed, and defendant refused to honor its subscription, arguing there was a failure of consideration because the college failed before any sums were scheduled for payment under the terms of the letter. Plaintiff trustee filed this action seeking declaratory judgment that defendant was liable for the payment of funds it had promised to pay the college. The trial court held in favor of plaintiff. On appeal, Supreme Court of Iowa affirmed the judgment of the lower court.

ISSUE:

Could a corporation be liable by its employee’s letter evidencing a charitable subscription for the payment of funds it promised to a party’s college prior to the college's failure?

ANSWER:

Yes.

CONCLUSION:

It was more logical to bind charitable subscriptions without requiring a showing of consideration or detrimental reliance.  Charitable subscriptions often served the public interest by making possible projects which otherwise could never come about. However, where a subscription was unequivocal the pledgor should be made to keep his word, and in this case, the subscription was unequivocal as evidenced by defendant's letter.

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