|Volunteer Legal Handbook, 9th Edition
Handbook > Glossary
Adhesion contract. A contract where the bargaining power of the parties is so unequal that the terms are offered on a "take it or leave it" basis, with no opportunity to negotiate. Insurance policies are an example. Where there is any ambiguity in the terms of an adhesion contract, the ambiguity will be interpreted against the person who wrote the contract and in favor of the reasonable expectations of the non-drafting party.
Appellate courts. A court, usually consisting of more than one judge, which reviews the decisions and results of trial courts at the request of a party. Appellate courts issue written decisions, which collectively constitute case law or the common law.
Arbitrator. A person with whom parties to a dispute contract for the resolution of a dispute. The decision of the arbitrator may be advisory or binding, depending upon the agreement. Arbitration is one form of alternative dispute resolution.
Authority. The rules and restrictions imposed by a principal on an agent, specifying the conditions and circumstances in which the agent may act for the principal. Authority can be expressly granted or can be implied from the circumstances.
Best Practices. A set of guidelines or standards reached by consensus that are regarded as the best way to manage an issue. Nationally, the best known best practices are those set by Panel on the Nonprofit Sector. In Alaska, a consortium of corporate donors, led by the Rasmussen Foundation, is developing best practices.
Charitable corporation. A kind of nonprofit corporation which exists to support charitable causes, and whose income is generally exempt from taxation by Federal and State law. A Section 501(c)(3) charitable corporation is a special kind of charitable corporation: persons who make donations to a Section 501(c)(3) charitable corporation are usually entitled to deduct the amount of their contribution from their gross income on their personal income tax returns. The Internal Revenue Code is extremely complex in this regard.
Compensatory damages. Damages a wrongdoer is required to pay to a victim to compensate the victim for the consequences of the wrongdoers actions or inactions. There are many different kinds of compensatory damages, based upon the kinds of injuries that have been sustained.
Consideration. In the context of a contract, some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. The thing that is exchanged in a contract.
Corporate veil. The general rule that members of a nonprofit corporation (and the shareholders in a for-profit corporation) are not liable for the debts of the nonprofit corporation beyond the extent of any financial commitment they may have made to the nonprofit corporation. There are numerous exceptions to the general rule, and there are also circumstances in which the protection of the corporate veil may be lost, so-called "piercing the corporate veil."
Defamation. Written or oral statements made by one person to another, and made public ("published"), which tend to bring the character or reputation of that person into disrepute, or to expose them to unreasonable personal embarrassment. Defamation is called "libel" if it is printed and "slander" if it is oral. Truth is an absolute defense to defamation, and under some circumstances even untruths may be privileged and immune from liability.
Director. A person selected by the membership of a nonprofit corporation or, if the Bylaws so provide, the board of directors, to serve as a person in charge of the overall policy of a nonprofit corporation, including the selection of officers. Not to be confused with Executive Director.
Endorsement. (a) A provision added to an insurance policy, usually at additional cost, to provide coverage for a risk not otherwise covered. (b) A person other than the original signer who signs a check or note.
Executive director. The person in a nonprofit corporation ordinarily responsible for management of the day-to-day affairs of the nonprofit corporation, and responsible for the implementation of policies set by the board of directors. The equivalent of a "chief executive officer" in a business corporation. Not to be confused with a director, a member of the board of directors of a nonprofit corporation.
Fiduciary. A special relationship of trust and confidence owed by one person to another. The relationship imposes a number of special obligations on the fiduciary, including a duty of due care and a duty of loyalty. Supreme Court Justice Cardozo, in a famous quotation, described it as "something more than the ordinary honor of the marketplace" and instead "the very punctilio of honesty and forthrightness." A breach of a fiduciary duty exposes the wrongdoer to liability for punitive damages and compensatory damages.
Foreign Corporation. A corporation organized in a state other than the state in which it intends to do business. For example, a Washington corporation doing business in Alaska. Typically, the state in wish the corporation wants to do business will require the foregin corporation to register before it may lawfully conduct business.
Mediator. A person with whom parties to a dispute meet, in an effort to have the mediator assist them in reaching a mutually acceptable decision. Unlike an arbitrator, the mediator does not impose a decision on the disputants; rather, he attempts to help them find a solution acceptable to them.
Members. In a membership nonprofit corporation, the persons who elect the board of directors of the nonprofit corporation and enjoy such other rights as may be provided by the Articles of Incorporation, the Bylaws and state law.
Nonprofit corporation. A corporation which is not intended to operate for profit, but rather is barred by law from making a profit. Not to be confused with a "charitable corporation," which is a special kind of nonprofit corporation.
Officer. A person, not necessarily a director or even employee of a nonprofit corporation, elected by the board of directors to serve as an appointed agent of the nonprofit corporation. Most frequently the president, one or more vice-presidents, a secretary and a treasurer.
Personal guaranty. A contract by one person to pay the debt of another in the event that other person defaults. For example, a promise by a director of a nonprofit corporation to pay a bill of the nonprofit corporation if the nonprofit corporation fails to do so.
Principal. A person who directs the activities of another, and has provided that other person with authority to act in his or her name.
Proximate or legal cause. In negligence law, the existence of a causal relationship between a breach of the duty of care and the injury suffered by a victim. If the causal relationship is too attenuated, legal or proximate cause may not be present.
Punitive damages. An award of money in favor of a victim that is intended to punish the wrongdoer and not just to compensate the victim. Also called "exemplary damages." Punitive damages sometimes exceed the amount of actual damages by a factor of two or three times.
Release. A written agreement between two persons, by which one agrees not to sue the other, or to abandon an existing lawsuit, even if there is no basis for the lawsuit at the time the agreement has been made.
Risk management. A general term for the various techniques available to an organization to control and minimize the chance of liability to a third party. It includes insurance, education, documentation and a variety of other means. The term includes both risk prevention and the handling of risk events when they occur.
Unincorporated Associations. An for-profit or non-profit organization that doesn't have a formal structure and, in particular, doesn't have a means of limiting the liability of individual members for actions for inactions of other members. It's what is created when you don't formally create anything.