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Personal Liability of Members

A voluntary association is defined as individuals who join together for some object and use a common name.[i] A member of a voluntary association is personally responsible for a contract entered by a nonprofit association only if the member is viewed as though he/she were a principal and the association were his/her agent and that member authorized or ratified the contract in question.[ii] An individual who contracts in the name of a voluntary unincorporated association is personally liable, if there is no agreement with the other party releasing him/her from personal liability.[iii]

Each member of a voluntary association is liable for the debts incurred during his/her period of membership.  All members of a voluntary association are jointly and severally liable for the contractual obligations of the association.[iv] The members of a profit or non profit association will be personally liable for the debts of the association.[v] However, if a business entity is a corporation, the shareholders are generally not personally held liable for the contractual obligations of the corporation.[vi]

It was observed in Victory Committee v. Genesis Convention Center, 597 N.E.2d 361 (Ind. Ct. App. 1992), that the members of a non profit unincorporated association are liable for the obligations incurred by the association under a contract if the members authorize the contract or subsequently ratify the terms of the contract.

Whereas, a person who assumes to act as the agent of a principal who has no legal status renders himself/herself individually liable on contract.  An agent will be held personally liable where he/she professes to enter into a contract for a principal who is nonexistent at that time.  Therefore, an agent is personally liable if he/she professes to enter into a contract on behalf of an unincorporated association, club, or committee.[vii]

Members of an unincorporated association can become liable for a contract by estoppel.[viii] However, members of an unincorporated association are not bound by the unauthorized or unratified representations of a member.  If the members of an association assent to or ratify a contract in its name, they become liable under the same.[ix]

[i] Benjamin Plumbing, Inc. v. Barnes, 162 Wis. 2d 837 (Wis. 1991)

[ii] Karl Rove & Co. v. Thornburgh, 39 F.3d 1273 (5th Cir. Tex. 1994)

[iii] Lamm v. Stoen, 226 Iowa 622 (Iowa 1939)

[iv] Elections Bd. v. Ward, 105 Wis. 2d 543 (Wis. 1982)

[v] Shortlidge v. Gutoski, 125 N.H. 510 (N.H. 1984)

[vi] Benjamin Plumbing, Inc. v. Barnes, 162 Wis. 2d 837 (Wis. 1991)

[vii] Medlin v. Ebenezer Methodist Church, 132 S.C. 498 (S.C. 1925)

[viii] Hutchins v. Grace Tabernacle United Pentecostal Church, 804 S.W.2d 598 (Tex. App. Houston 1st Dist. 1991)

[ix] Air Park-Dallas Zoning Comm. v. Crow-Billingsley Airpark, Ltd., 109 S.W.3d 900 (Tex. App. Dallas 2003)

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