Non-profit Organizations and Patrons' Protection: A Comparative Legal and Economic Analysis of Civil Law and Common Law Systems

Giovanni Tamburrini

The unceasing proliferation of non-profit organizations indicates more and more clearly problems of resources’ allocation which are common in the for-profit sector. Whereas for the latter legal tools have been developed in order to allow shareholders to claim responsibility of their boards directly, non-profit organizations still operate with a very weak system of oversight.

This paper investigates solutions offered by two different legal traditions, namely the Italian and the US American. In particular, the analysis focuses on the dichotomy civil law-common law to find out how the relevant principles of contract law apply to patrons-directors’ relationship. The notions of causa and consideration, in fact, play a fundamental role to determine the dimension of such contractual relationships and to identify which actually are the terms of the contract itself. Basically, it is assumed that non-profit by-laws contain clauses which mandate directors to employ funds according to the scopes of the organization itself. To deem those provisions as part of the contract between patrons and directors would prove far more complicated in common law jurisdictions where courts tend to rely very heavily on the negotiated and written terms. For practical reasons, US state laws have therefore preferred to keep non-profit organizations on a public dimension, entrusting only to the General Attorneys the power to enforce the break of fiduciary duties from directors. In Italy, on the other hand, the criteria associated with the interpretation of the contracts are more elastic. Such an approach allows the courts to consider the clauses of the articles of association as terms of the contract between patrons and director and acknowledges the former with the power to sue the latter, in that way underscoring the private dimension of non-profit organizations. The system of control over directors’ conduct in non-profit firms represents a very fundamental aspect providing the necessary pressure to keep the firm efficient.

Cite as: Giovanni Tamburrini, Non-profit Organizations and Patrons' Protection: A Comparative Legal and Economic Analysis of Civil Law and Common Law Systems, vol 13.3 ELECTRONIC JOURNAL OF COMPARATIVE LAW, (September 2009), <>.

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