The donors that are the staff and benefactor donated with their free will and there was no contract beforehand saying the money will be returned to the donors in case UGC backs out. There was no such contract so there is no breach of contract legally. In this case the staff and benefactor donated with their free will to benefit their university only so it was an agreement and although the purpose was the matching fund from UGC but if the Vice Chancellor of the university has decided to use the funds for development of the university then it is a legal decision.
There does exist an oral contract between the donors and the University to use the money solely for development purposes directed only towards the university. In this case the chancellor has intimidated to use the money for development of the university which means there is no breach of the oral contract. Thus, it is legal for the chancellor to use the money for the University. However, the Chancellor chose the wrong way to break the news since he should have called up a meeting and discussed the matter on whether to return the money or keep it for the university. He could have explained how important the funds are for the development of the university and the donors would have been motivated to let him use the money for the university.
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