A recent Canadian court case demonstrates the pitfalls of philanthropic donations and the need to specify conditions in Donor Investment Agreements (DIA).

The case of FASS v Centre for Addiction and Mental Health 2018 highlights the issue of donor rights in the direction taken by the recipient organisation in relation to the funding.

The court found that there were no grounds for the requested order to investigate on grounds of financial mismanagement. The direction taken in the case may have been chosen due to the court’s inability to enforce a provision in the Donation Investment Agreement (DIA) because donor direction over use of funds was not originally spelled out.

This means that, once a donation is made without any legally binding conditions, the fulfilment of the donors wishes is only morally binding.

Paxton-Hall Lawyers suggests that a gift can, however, be made with conditions attached via the DIA. If this condition is not acted upon, the courts will treat this a legally binding.

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