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Powers and Rights of Organizations

Generally, a voluntary unincorporated organization can perform all necessary governing acts in any way consistent with the purposes of the organization and with the internal and external laws of the organization.  However, there are limitations imposed upon a voluntary organization.

A voluntary organization can use legitimate and legal means to promote its aims and purposes and to advance its members’ interests.  An organization can appropriate its funds for promotion of its purposes.  However, its funds can be utilized only with the consent of its members.

Generally, a voluntary organization does not have a separate legal personality.[i] Therefore, a voluntary organization has no capacity to enter into a contract.[ii] Accordingly, an organization that has no authority to make a contract cannot ratify a contract.[iii] If a person accepts money from an organization dealing with it as a legal entity, the person is estopped from denying its legal capacity at a later time.[iv]

An unincorporated organization has no right to acquire or hold property.  However, statutes can provide power to acquire and hold property, estates, and interests in the property to unincorporated organizations.[v] Also, an unincorporated organization cannot acquire property by purchase or gift.  When property is acquired in the name of an unincorporated organization, the property belongs to its members.[vi] Property cannot be bequeathed to an unincorporated organization.  A bequest to an unincorporated organization cannot be effectuated by the incorporation of the organization subsequent to the death of the testator.[vii]

An unincorporated organization cannot dispose of property held by its members.  However, if a statute provides an organization the power to sell or convey title to another person, the organization can dispose of property.[viii]

Generally, an unincorporated organization cannot sue or be sued since it is not a legal personality.  However, officers of an organization can maintain a case against unlawful interference by third parties.[ix] In certain circumstances, an unincorporated voluntary organization can file a writ of prohibition to prevent unlawful judicial control of its internal affairs.  Similarly an organization can also file cases for illegal appropriation of its name or insignia.

Every unincorporated organization has a common law right to use its name and to restrain others from using it without right.  New organizations cannot have the same or similar name as an existing unincorporated organization.[x] If another organization uses the name of an existing organization, the existing organization can go to court to seek an injunction.  Groups that were a part of the earlier organization also cannot use the name of the parent unincorporated organization.[xi]

Organizations may protect themselves from injuries resulting from the fraudulent use of their name or similar names by other like organizations.[xii] Incorporation is not a ground for fraudulently using the same or similar names of other like unincorporated organization.  Organizations can obtain injunctive relief against persons improperly using insignia, badges, and emblems resembling their organization because such uses can deceive the public[xiii].

[i] Phoenix Ins. Co. v. Burkett, 72 Mo. App. 1 (Mo. Ct. App. 1897)

[ii] Newton County Farmers’ & Fruit Growers’ Exchange v. Kansas C. S. R. Co., 326 Mo. 617 (Mo. 1930)

[iii] Elk Valley Coal Co. v. Thompson, 150 Ky. 614 (Ky. 1912)

[iv] Reding v. Anderson, 72 Iowa 498 (Iowa 1887)

[v] Highlands Township Taxpayers Asso. v. Highlands Township Taxpayers Asso., 62 N.C. App. 537 (N.C. Ct. App. 1983)

[vi] Guild v. Allen, 28 R.I. 430 (R.I. 1907)

[vii] In re ROCHESTER TRUST & SAFE DEPOSIT CO., 273 A.D. 79 (N.Y. App. Div. 1947)

[viii] Nesbitt v. Letz Hunting Club, 1960 Pa. Dist. & Cnty. Dec. LEXIS 17 (Pa. C.P. 1960)

[ix] Purington v. Hinchliff, 219 Ill. 159 (Ill. 1905)

[x] Lewis v. First Federal Sav. & Loan Asso., 524 S.W.2d 783 (Tex. Civ. App. Austin 1975)

[xi] Farnum v. Balckstone Canal Corp., 8 F. Cas. 1059 (C.C.D.R.I. 1830)

[xii] Modern Woodmen of American v. Hatfield, 199 F. 270 (D. Kan. 1912)

[xiii] Most Worshipful Prince Hall Grand Lodge, etc. v. Most Worshipful Hiram Grand Lodge, etc., 85 Colo. 17 (Colo. 1928)

Inside Powers and Rights of Organizations