Caution: cautioner's liability

Question 1

Amount and limits? [c]

Answer 1

o (unless expressed) CA is only liable to extent of original debt + interest (Struthers v Dykes)
o Principle of co-extensiveness
• CA liable (unless otherwise specified) for full extent of loss sustained by C resulting from D’s default
• so any repayment of debt will decrease CA’s liability

Question 2

Are further advances covered?

Answer 2

• Continuing caution: liability extends

- Fixed caution: second unsecured debt

Question 3

Further advances
-fixed caution
how debtor should repay? [2c]

Answer 3

• Appropriation of payments – order of priority: D’s decision then C’s decision (Jackson v Nicoll (1870))
• If not – Clayton’s Case – first debt contracted is to be discharged

Question 4

Further advances?

Limited caution and partial payment of the debt? [c]

Answer 4

FW Harmer & Co v Gibb

o Limitation on debt guaranteed: partial repayment reduces CA’s exposure

Question 5

Further advances?

Limitation on CA’s total liability

Answer 5

remains liable to pay up to the limit even if there have been repayments
-so no need for appropriation

Question 6

Further advances?

Limitation on debt guaranteed

Answer 6

partial repayment reduces CA’s exposure

• Appropriation of repayments