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Corporations

University of Michigan Law School

1982

Nonprofit Organizations Law

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Another Theory Of Nonprofit Corporations, Ira Mark Ellman Apr 1982

Another Theory Of Nonprofit Corporations, Ira Mark Ellman

Michigan Law Review

This Article argues that the distinction between donors and customers is critical, and that the contract failure model is therefore seriously flawed. It distinguishes two types of nonprofit corporations - those structured to satisfy donors' needs ("donative nonprofits") and those structured to satisfy customers' needs ("mutual benefit nonprofits"). This dichotomy suggests a very different nonprofit corporation law than the one urged by Hansmann. Once the concept of contract failure is limited to donors, it can be refined to serve as part of the rationale for donative nonprofits. Refining the concept of contract failure reveals, however, that it confuses the analysis …