Beneficial Association

The authority and powers of beneficial associations are subject to the statutes under which the associations are formed and organized. An incorporated association may not enlarge the powers granted to it by the statute under which it was created. Certain powers, such as the power to enter into contractual relations, may be implied when they are essential to the accomplishment of the association's objectives. Contracts are binding upon the association when they have been executed by the appropriate officers of the association. Through its proper committees or officers, a beneficial association may enter into a lease.

Generally, a beneficial association has no power to borrow money. However, some states permit proper officers or committees to execute bonds and mortgages in order to secure building loans.

Ordinarily, beneficial associations can transact business in places other than the state within which they have been organized.

Because beneficial associations are founded on the principle of mutuality, in which each member shares all the benefits as well as all the burdens, they do not have capital stock, nor do all associations maintain a fund for paying benefits. If a fund is not maintained, each member promises to contribute an equal share with every other member as the association's need for funds arises.

Unless a statute makes a distinction, courts generally recognize a beneficial association certificate containing insurance features to be the same as any other similar insurance contract. If the certificate indemnifies a member in case of disability or death, the association will be regarded as a mutual insurance company. However, beneficial associations are not the same as insurance companies. First, beneficial associations do not have as a purpose the goal of indemnifying or securing against loss; rather, they create a trust fund with their members' dues, from which they may provide relief to their members. Second, beneficial associations are not created for profit. Third, these associations do not advertise for business but limit their clientele to their members. Finally, whereas an insurance company fixes a beneficiary's rights with the terms of the insurance policy, a beneficial association member's rights to receive benefits depend on both the certificate and the constitution and bylaws of the association.

Power to Acquire Funds and Property A beneficial association may acquire and dispose of property in a proper manner and for proper purposes, whether by sale, deed, lease, mortgage, or other document. A valid bequest of property for charitable purposes may be made to an association that has been incorporated and authorized by its charter to hold property for such purposes.

The funds of a beneficial association should be spent according to the association's purpose as defined by its charter, articles of incorporation, constitution, or bylaws.

Benefits A beneficial association's bylaws and controlling statutes specifically designate which benefits are payable to its members, and the types of benefits provided are restricted to those specified.

Beneficial associations may make payments in two ways. The first is based on the contractual agreement between the association and its members. As with an insurance policy, the members' dues are a contribution to a fund from which specified benefits are paid upon a proper claim. Disputes arising from this contractual relationship may ultimately be resolved in a court of law.

The second way a beneficial association confers payments is through an act of benevolence. The term benevolence means the doing of a kind or helpful action towards another, under no obligation except possibly an ethical one. A beneficial association may appoint a board to review applications for benefits not based on the contractual relationship. This board could, for example, extend additional financial benefits to a disabled member who has exhausted the benefits specified in the bylaws. If such a benefit is given as a matter of benevolence, it may not be claimed as a right, and it is not enforceable in court. Likewise, a beneficial association could donate money to a civic activity as an act of benevolence.

An association may set forth certain conditions precedent to the receipt of benefits by its members. Such conditions must be met before the right to receive benefits may be enforced.

If a member of a beneficial association defaults on the payment of dues, the member might lose the right to receive benefits.

In general, one claiming benefits from an association must exhaust all remedies within the organization before seeking judicial relief.

Liabilities A beneficial association may not ordinarily be held liable in TORT or contract for unauthorized acts of its members or agents. A voluntary unincorporated beneficial association is considered to be a joint enterprise, and no liability for tort exists between those engaged therein. An unincorporated association, may, however, be held responsible for damages resulting from the NEGLIGENCE of its employees in work of a noncharitable character.