Personal Liability for Breach of a Nonprofit Association's Contract In Colorado
Section 7-30-106 substantially changes the law with respect to unincorporated non-profit associations. It provides in pertinent part as follows:
(1) a nonprofit association is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities in contract and tort.
(2) a person is not liable for a breach of a nonprofit association's contract merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
There is no case law construing or applying this provision of the Association Act. the Association Act makes a nonprofit unincorporated association a legal entity separate and apart from its members.
Therefore, logically, nonprofit unincorporated associations are more in the nature of corporations, limited partnerships, or limited liability companies.
This basic and fundamental change has a considerable impact on the liability of members and others for the liabilities of nonprofit unincorporated associations. the official comments make these changes, and their implications, clear.
Two of the official comments state:
3. Subsections (2) through (5) are applications to common cases of the basic principle in subsection (1).
Because a nonprofit association is made a separate legal entity, its members are not co-principals. Consequently they are not liable on contracts or for torts for which the association is liable. Subsection (2) specifies that result with respect to contracts.
4. Subsection (2) applies the principle in subsection (1) to relieve members and others from vicarious liability for the contracts of a nonprofit association.