cautionary obl

Question 1

what is a security

Answer 1

any right which a cred may hold for ensuring payment or satisfaction of his debt distinct from and in addition to his right of action and execution agaistn the debtor latters personal obl

Question 2

the accessory nature of security

Answer 2

parasitic upon the obligation secured debt can exist without security

Question 3

best fertilizers of Arizona v burns

Answer 3

the note us the cow and the motgage the tail. the cow can survive without the tail but the the tail cannot survive without the cow.

Question 4

cautionary obligation

Answer 4

Cautionry is an accessory obligation or engagement as surety for another, that the principal obligant shall pay the debt or perform the act for which he has engaged, otherwise the cautioner shall pay the debt or fulfil the obligation

Question 5

Caution (noun); cautionry (noun); cautionary (adjective).

Answer 5

A owes money to B (under what area of law?), and C guarantees to B that debt will be paid.  C is cautioner (guarantor). English term: “surety/ship.”  A is principal obligant (debtor).  B is the creditor.

The creditor B ends up with two personal rights.

One against the principal obligant, A (the obligation owed by A to B is the obligation secured).

B’s other personal right is against the cautioner, C (this obligation owed by C to A is accessory on the principal obligation).

CREDITOR HAS A RIGHT AGAINST THE DEBTOR POTENTIALLY TWO DEBTORS AVOID USING THAT TERMS PO INTEAD

Question 6

EXAMPLES OF CAUTIONARY OBLS

Answer 6

By director/shareholders of small company
. (2) Family.
(3) Parent company for subsidiary: “downstream”.
(4) Subsidiary company for parent: “upstream”.
(5) Subsidiary company for subsidiary: “cross-stream”. (6) Bank for customer: bank will charge premium.
(7) Insurance company for person appointed by court as eg executor-dative.

Question 7

SMITH V BANK OF SCOTLAND

Answer 7

THIRD PARTY PLEDGE CAUTIONARY OBLS BUISNESS OPERATED BY SMITH GUARENTEE A COMPANY TO BE THE OWNER AND THE WIFE AGREE
to guarantee building( mortgage over co-owned house so NEED WIFE AGREEMENT

Question 8

CAN CAUTIONER SUE PRINCIPLE OBL

Answer 8

can sue princ obl for amount due but not thtorugh law of contract or promise
cautioner obl is to never to more that what is owed by the principle obl
the cautioner may cap liability further debt up until a certain time
limited liablity in small company shareholders fully paid shared serp personality tying shareholders personally

Question 9

Hewitt v william

Answer 9

cautionary obl

if a third party pledge certin principles of cautionary obl apply to 3rd party pledge = DUTY OF GOODFAITH

Question 10

QUASI CAUTION

Answer 10

Partners for their firm (see your lectures on partnership law). (2) Endorsers of negotiable instrument

Question 11

CAUTION DISTINGUISH FROM OTHER THINGS

Answer 11

1. “Guarantee” also means express contractual warranty eg of quality of goods.
   (2) Representation as to creditworthiness. Eg bank reference. If negligent may give rise to liability in delict. (Cf Hedley Byrne & Co v Heller [1964] AC 465.)
   (3) Letters of comfort. Kleinwort Benson v Malaysian Mining Corp [1989] 1 All ER 785.
   4) Indemnity. This term sometimes used to mean caution. But strictly means obligation by X to compensate Y for any liability incurred by Y of certain defined type, eg debt to Z. Thus ultimate liability falls on X, but Z has no direct claims against X. Also called “obligation to free and relieve.”

Question 12

IMPORPER CAUTION

Answer 12

cautioner and principal obligant purport to bind themselves as joint borrowers, but the intention differs
DOES NOT EXPRESSLY STATE LOOKS LOEM THE CAUTIONER MAY HAVE ONE. CRDITOR KNOWS THAT THEY ARE A CAUTIONER

Question 13

PROPER CAUTION

Answer 13

ere true situation is stated – the cautioner is explicitly bound as cautioner for a specific debtor

caution gives the cautioner the benefit of discussion and division historically – reformed by Mercantile Law Amendment (Scotland) Act 1856. Improper caution does not have those benefits.

What is discussion and division?

 Division and discussion (if proper cautionry) o Division: a co-cautioner is only entitled to a pro rata share of debt and can only be asked to pay if all cautioners are asked to pay o Discussion: the cautioner only has to pay when the creditor has taken all reasonable steps to enforce the debt against the principal obligant. This is only available if contracted for: Mercantile Law Amendment (Scotland) Act 1856, s 8. o Both can be supplanted by agreement.
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Now, generally if the debt is not paid the creditor can rely on the principal obligant and the cautioner to share joint and several liability

Question 14

JOINT AND SEVERAL LIABILITY

Answer 14

EXTERNAL ASPECT THEY CHOOSE WHO TO SUE
there are two focuses
the liability that the debtors own and the liability between the debtors

INTERNAL PERSPECTIVE sue cautioner FIRST then CUTIONER HAS right of relief against the PO

EXTERNAL PERPECTIVE- THEY CHOOSE WHO TO SUE

Question 15

EXAMPLE OF CAUTIONERS ESCAPE LIABILITY

Answer 15

C= CRED
X= CAUTIONER
D= PO
if C dupes D then C liable under validity of contractual NO contractual relationship of D so X can excape liability

c induces X to enter the cautionary obl. c misrep the pos but X knows real pos = NOT INDUCED AND IS BOUND

Question 16

ROYAL BANK OF SCOT V RANKIN

Answer 16

2 CAUTIONERS.1 escapes liability as the PO was misrep they did not have RELEVANT LEVEL OF K OWLEDGE TO BE BOUND but THE OTHER STILL BOUND AS RELEVANT LEVEL OF KNOWLEGDE

Question 17

cration of cautionary obls

Answer 17

writing not required s,1/2
rowa
unless gratuitous not granted in the course oif buinsess but even if writing is requored and not produced a cred who lends can rely on personal bar againt the cautionwer

Question 18

essential validity of cautionary obls

Answer 18

The usual rules of essential validity for constitution of voluntary obligations apply. Remember the key relationship is between the creditor and the cautioner. So remember the usual grounds of challenge that apply to transactions (see your notes from contract law). The analysis of the relationship between creditor and cautioner is important because the cautioner owes an obligation to the credit

Question 19

ROB V RANKIN

Answer 19

ADEBTOR PO
BCRED
CCAUTIONER

b INDICES c TO ENTER CAUTIONARY OBLS
INVALID IF NOT ENOUGH KNOWLEGDE

B MISREP POS TO C BUT C KNOWS REAL POS

Question 20

ROB V RANKIN

Answer 20

ADEBTOR PO
BCRED
CCAUTIONER

b INDICES c TO ENTER CAUTIONARY OBLS
INVALID IF NOT ENOUGH KNOWLEGDE

B MISREP POS TO C BUT C KNOWS REAL POS

C gives cautionary obligation to B without awareness of A financial pos (thinking A solvent)
-still held liable if C presumed no duty on B to disclosure

as above but c ASKED ABOUT A’s pos= if asked then A has duty to disclose

AS above BUT B becomes aware that C completely misunderstands As transactions

Question 21

ROYAL Bank v greenshields

Answer 21

B becomes aware that C completely misunderstands As transactions
lord clyde cred becomes aware that cautioner does not know what is going on then cred has to let them know

cred has two personal rights
no relationship in law of obls 3rd party dupes into
contract doesn’t matter- cautioner normally offered PO.
PO had little insentive to tell the truth

Question 22

young v clysdale bank

Answer 22

A claims finance are fine anf C grants cautionin fvour of B

Bank lending has to be disclosed up until mid 1920sin England things have changed

Question 23

Barclays bsnk v obrain

Answer 23

husband and wife sign a mortgage to secure husbands debts for business
wife on signed relying on H assurances mortgage enforced w tries escape liability

UNDUE INFLUENCE IN A CASE LIKE THIS MAY ARISE. WHERE ONE PARTY IS PRESUMMED TO SIGN OR CONSTRUCTIVE SACTION BANK PUT A NOTICE COAUTIONER HAS TO TAKE INDEPENPENDANT
IF NO INDEPENDANT ADVICE = STUCK DOWN

Question 24

SMITH V BANK OF SCOT

Answer 24

L. JAUNCY
Wanted to dissent but checked to no cannot intead
L.clyde
relationship between PO and cautioner is such that cautioner needs independent advice.
if fails then it is set aside as a breach of goodfaith PO = duping = actionable wrong
Actionable wrong
misrep princ obl dup = set aside
and not asking then to

Question 25

royal bank of scot v wilson

Answer 25

live next door to eachother std security requested because business concerned. there was w was an all sums secured by security WIFE secures business for husband
HELD NO ACTIONABLE WRONG SHE HAD INTEREST IN BUINESS. ONLY GRAT INTEREST ARE STUCK DOWN

Question 26

bank of scot v cooper

Answer 26

no letter in file to show that bank of scot could prove tht co owner was given independent advice thus SECURTIY STRUCK DOWN LECTURE VIEW IN PREACTICE DO NOT HAVE TO KEEP LETTERA FOR MORE THAN 6 YEARS PROBS THROWN AWAY

Question 27

Can the cautioner demonstrate that the debtor had committed an actionable wirng against the cautioner AND as cautioner they had relied on said wrong
which actionable wriongs are covered

Answer 27

smith 
relationship not fully formed 
actionable wrong 
did grant gart
did cred warn to get independent advice  if you FAILE ONE = NO CLAIM

Question 28

royal bank of scot v etridge

Answer 28

where the house house of lords set down detailed compulsory guidelines for the cred to fllow to ensure that it was satisfied
proformal agreement cautionar has 2 options sue the bank strike down OR
sue the sol as the advice wass not good eniugb to explain consequenses

Question 29

liability in solidium Joint and several

Answer 29

Principal obligant and cautioner liable in solidum. So it is joint and several liability (discussed earlier – meaning the creditor can claim whole sum from either). Must be default, but creditor need not first seek to enforce against principal obligant. The cautioner has a right of relief against the principal obligant, if the cautioner has to pay the creditor.

Question 30

Extent of liability: General

Answer 30

(1) Caution for a fixed debt (eg £10,000 loan). Cautioner’s liability can never increase. (2) Caution for a fluctuating amount (eg overdraft). This is a continuing guarantee and (unless otherwise agreed) may be terminated by notice to creditor, which fixes liability at sum then due.

Example (combined with rule in Clayton’s Case): Anne is cautioner for overdraft of Beta Ltd. When overdraft stands at £25,000 Anne terminates. Thereafter credits to account of £12,000 and debits of £10,000. Anne now liable only for £13,000. (The £10,000 of debits are post-termination loans

Question 31

Extent of liability: Liability ceilings

Answer 31

Caution is often limited to defined ceiling: eg caution for overdraft but maximum liability £60,000.

This can lead to interpretation problems. Suppose principal debtor sequestrated. Debt £100,000. Dividend (which is the amount paid out of the debtor’s estate on sequestration) 30% = £30,000. Then:

1) Is the £30,000 to be ascribed to guaranteed part of debt? In that case cautioner now liable only for £60,000 minus £30,000 = £30,000.

The creditor gets the £30,000 dividend plus the amount due from the cautioner, a maximum of £60,000

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2) Or is the £30,000 to be ascribed to non-guaranteed part of debt? In that case cautioner liable for full £60,000.

The creditor in this case gets the £30,000 dividend PLUS the amount due from the cautioner – recovering £90,000 in total.

3) Or is the £30,000 to be ascribed rateably to both? That would mean: £12,000 to non-guaranteed part and £18,000 to guaranteed part. In that case cautioner liable for £60,000 minus £18,000 = £42,000.

The creditor in this case gets the £30,000 dividend PLUS the amount due from the cautioner after rateable apportionment. This means the creditor gets £72,000 in total.

Question 32

can cautioner be held resp for full amount owed by PO

Answer 32

if cautioner applied a cap then no.over draft fluctuated can be increased the cautioner mey not want to be held resp so may apply a cap to prevent them from being held liable for full debt of cautioner
the cap can either be a PROP if the debt or a FIXED SUM
CONTRACT WILL STATE EXPLICITLY

Question 33

example
b account = 0k crd
account = 5000k debit
A puts guarantee 5k and put notice to cap

B= 1k into account
b= 0.5k out
B = 0.5 k out
b=1.5 in
b=1 k out
b =1k out
b = 0.5 in
what is bs liabilty

Answer 33

1. earlies credt meets earliest debt
   2.this means any money that b receives into their account goes to pay off the debt pre cap.
2. so total credit going in to account in 3 k
3. this will pay of 3k of debt pre cap
   pre cap debt= 2 k- which still has a guarantee
4. debt after cap remains at 3k

Question 34

Harvie vtrs v bank of scotlad

Answer 34

defendant rules in interpresting if flux = prop
where as fixed will be cap

the interpretation is dependent onb the wording of the bond a clause that leads to 2 is called an ultimate loss caclause
The creditor in this case gets the £30,000 dividend PLUS the amount due from the cautioner – recovering £90,000 in tota

seems to be wbaf the law presumes
:The creditor in this case gets the £30,000 dividend PLUS the amount due from the cautioner after rateable apportionment. This means the creditor gets £72,000 in total.

Question 35

what rights does a cautioner have

Answer 35

 Right of relief – the right to get payment from the principal obligant (but what happens in bankruptcy? See below) 
If cautioner has paid, creditor must assign the right to enforce the debt and any existing securities to the cautioner: beneficium cedendarum actionum. 

Division and discussion (if proper cautionry)
Division: a co-cautioner is only entitled to a pro rata share of debt and can only be asked to pay if all creditors asked to pay o Discussion: the cautioner only had to pay when the creditor has taken all reasonable steps to enforce the debt against the principal obligant. This is only available if contracted for: Mercantile law Amendment (Scotland) Act 1856, s 8. o Both can be supplanted by agreement. (see earlier for discussion) 

Cautioner has right to rank in bankruptcy of principal obligant (if the cautioner has paid the debt in full) but the cautioner cannot rank in the bankruptcy of the principal obligant if the creditor has ranked for the debt in the bankruptcy (as a result of the rule prohibiting double ranking). The rule on bankruptcy is complicated and warrants special consideration

Question 36

discharge of cautioner by agreement of credit

Answer 36

termination of cautionary obls

The creditor can agree to discharge the cautione

Question 37

extinction of the principal obl

Answer 37

termination of cautionary obls
When the principal debt is extinguishe
passage of time

Question 38

material alteration

Answer 38

termination of cautionary obls
Any alteration of loan terms, without consent of cautioner, implies discharge of cautioner, even if not prejudicial. However, note that further advances may not be covered. See Bank of Scotland v MacLeod 1986 SLT 504 overdraft = 10k day 1 extend to 20k cautioner argued material charge still caught by cautionary obl caution

Question 39

napier v crosbie

Answer 39

termination of cautionary obls

lend you more money = terminate cautionary obl material difference

Question 40

prejudicial conduct of cred

Answer 40

termination of cautionary obls
Giving time

Where creditor does not demand payment when it falls due (which serves to impact on the cautioner’s right of relief).

Where the creditor gives up securities

If the creditor voluntarily discharges a security the cautioner is released (to the extent of the security released).

Discharge of a co-cautioner

If there are multiple cautioners discharging one can lead to release of the other cautioners.

Question 41

prescritption

Answer 41

termination of cautionary obls
5 years from the date that the obligation becomes enforceable.

This may be 5 years from the date of demand: Royal Bank of Scotland v Brown 1982 SC 89

Question 42

bankcrupcy

Answer 42

termination of cautionary obls

distriction between real and personal rights

Question 43

Bankruptcy: the rule against “double ranking”
Alf owes Bert £60,000. Alf is sequestrated. Loan guaranteed by Carol to maximum of £40,000. Bert recovers £40,000 from her. Bert still ranks in sequestration for full original debt. Suppose dividend 20%: Bert paid £12,000 by trustee.
Carol has right of relief ie is creditor of Alf to extent of £40,000. Can she rank for this?

Answer 43

Bankruptcy: the rule against “double ranking”

No. This debt already “ranked for” by Bert (as part of the £60,000). If Carol could rank for it, that would be unfair to other creditors, since more than 20% would be paid on the original debt of £60,000.

Question 44

Alf owes Bert £60,000. Alf is sequestrated.
Bert holds standard security over property worth £40,000.
Property sold, Bert takes £40,000, and ranks as unsecured creditor for shortfall, ie £20,000. Suppose trustee in sequestration pays dividend of 20%, Bert gets £4,000. Total recovery: £44,000

Answer 44

A has a std sec over the house with B for 40k
but A debt is greater than the std sec.
so B recovers part of the sdebt by selling the house
then becomes unsec cred for the rest.
trustee in seq= 20% of 20k = 4k
b total recovery = 44k

Question 45

Alf owes Bert £60,000. Alf is sequestrated. Loan guaranteed by Carol to maximum of £40,000. . Suppose dividend 20%: Bert paid £12,000 by trustee. . (NB creditor cannot recover more than 100%.)

Answer 45

a-b 60k. 
Bert recovers £40,000 from her as he rank first.  Bert still ranks in sequestration for full original debt
 20% of 60k=
12k
40k+12
Total recovery: £52,000

Question 46

the mackinnon case

Answer 46

IF CAUTIONER PAY CRED FIRST THENTHEY GET FIRST RIGHT OF RELIEF AGAINST THE PO
IF THEY PAY AFTER THE INSOLVENSY PROCESS BEGAN THEN CRED CAN CLAIM RIGHT OF RELIF FROM CAUTIONER

IF B CLAIMED AGAINST A COULD PAY B THEN C, WOULD LOOSE THE RIGHT TO RELIEF THROUGH DOUBLE RANK RULE
Suppose that Carol paid the £40,000 before Alf’s sequestration.
Then Bert ranks only for £20,000.

Total recovery £40,000 + £4,000 = £44,000.
Carol ranks for £40,000.
Recovers £8,000.
Her total loss only £40,000 minus £8,000 = £32,000. So in her interest to pay early: Mackinnon’s Trs v Bank of Scotland 1915 SC 411

Question 47

Right of relief v. rarely has much value

Answer 47

principal obl unable to pay

rule against double ranking

Question 48

PO has gone insolvent. there was an agreement where cautioner agrees to pay 200
Po insolvensy means cred get div of 50p to £1
the pop owes crd 1k

Answer 48

capped cautionary obl example
the cred get 500 from 50p to £1 div
the cautioner agreed to oay 200 so they can retrieve that
overall cred gets 700
in theory cautioner has right of relief but doube ranking = not valid

Question 49

owes cred 1k
po goes insovent. cautioner guarentees a 1/5 of total debt
div set at 50p to £1 debt

Answer 49

goes insolvent with prop cap
cautioner = gurentee 1/5 of debt
PO will contribute 500 as div set at 50 p to a £1
1/5 of total debt =
1/5 of 500 to find out what cautioner contributes
= 100
cred gets a total of 600

Question 50

bank of scot v Hutchinson main

Answer 50

Mere obligation to grant security is not security. Must be constituted as a real right. This usually means possession or registration

Question 51

distinguish proper from improper asset sec

Answer 51

(1) proper from (2) improper asset security (sometimes referred to as quasi-securities). In (1) there are two real rights in the thing: the real right of ownership, which the debtor has, and the (subordinate) real right of security, which the creditor has (jus in re aliena). In (2) there is only one real right, ownership, which is vested in the creditor. The debtor has no real right, but has personal right to be made owner when debt is paid. Debtor may be regarded is owner in functional sense, but in law creditor is owner. Ownership is being used as security

Question 52

property of another

Answer 52

a right in sec is over property belonging to someone other than cred

Question 53

personal liability real laibilty

Answer 53

the debtors liability is distinct fromliaability of asset
cannot be pushed cannot be passed onto someone else remaining until exec pays with property

transfer of cres right= assignation of debt
transfer of debtors right transfer of ownership
changes of debtors right is not prevented by excsitance of sec and does not affect cred rights NEITHER PERSONAL/REAL

accessory rights
parasitic rights
secures obligatipon
1970 act secures debts and obls ad factuem praestandum
remedy to selling the asset and get money out disconnection with money value for breach of obl

real rights
right to sell asset pact to sell goes beyond that attaches to cred. can get paid before other cred
cannot have secret real right PUBLICITY PRINCIPLE seecutrity of land not crwated by debtor acceptance but by REG

Question 54

alabatown

Answer 54

accessory rights and the 2 year missives

dependent can personal right secured. security have no existance if NO DEBT

Question 55

warner v mason

Answer 55

rela right credit over property std sec can say no if security value reduced = ancillary pursuers to protect investment

Question 56

movable and heritable sec

Answer 56

taxonomies
corpeal movables= lien pledge land lords hypothec
heritable property- std sec( includes long lease)
incoperal movable- no right in sec as assignation required

Question 57

posessory and non posessory

Answer 57

taxonomies
possesioory= pledge and lien (car don’t pay garage excerciese lien and take pos until debt paid)
non possessiory- hypothecs includes std sec

Question 58

express, voluntary and judicial sec

Answer 58

taxonomies
express- voluntary consensual 
tacit- lega; arising out of operation of law steps in provides application to the court of any cred cease asset
judicial-dil= inhibiton and adjudication
attachment arrestement

Question 59

ranking floating charge vs std sec

Answer 59

you can have one or more security over property (eg floating charge and std sec)
leads to Q of priority ranking who gets what when asset is sold
gfloating charge is a NON POSSESORY HERITABLE MOVANLE over everything it owns

express sec not normal sec can be real right as soon as it goes into liquidation to have floating charge

oteher examples = double glazinfg finance
std sec double glasxing finance anf bank std secBANK PARID FIRST
POST OOSENED RANKING

Question 60

ranking

Answer 60

more than one sec is possible where one sec is a non possessory
in this case either post posed ranking or paripasi ranking will apply

Question 61

example 1 ranking
Example: Fiona grants standard security over her house to Gavin. Later grants one to Harriet. Fiona becomes insolvent. Gavin sells the house. It fetches £180,000. He is owed £120,000 and Harriet is owed £80,000.

Answer 61

Gavin receives £120,000 and Harriet receives £60,000. She is an unsecured creditor for £20,000.
G reg first so prior tempore jure = has real right prevails

Question 62

Examples 2 ranking

A owns house. Security in favour of B for £100,000 and ifo C for £100,000. House sold for £150,000 How to distribute if B and C rank pari passu?

If B ranks first (prior tempore potior jure)?

Answer 62

1. they are ranked equally so house sold for 150k they each get 75k then are unsecured cred for the rest
2. if b ranks first because reg first then he can claim his real right in se first

Question 63

A owns house. Security in favour of B for £200,000 and in favour of C for £100,000. House sold for £150,000 How to distribute if B and C rank pari passu?

Answer 63

200k:100k
2:1
1/(1+2) of 150
2/(1+2) of 150
1/3of 150k= 50k
2/3 of 150k= 100k
then unsecured cred for rest
house sold for 150k

Bankruptcy of deb tor: If asset worth more than debt, creditor is paid in full and balance goes to trustee in sequestration or liquidator. (Creditor cannot recover more than 100%.) If asset worth less than debt, creditor takes value of asset and is unsecured ordinary creditor for the deficiency

Question 64

catholic and secondary sec

Answer 64

If X has a security over plots A and B and Y has a postponed security over plot B, in the event of default X would have the power to realise either plot A or plot B. If X realised plot A and X’s debt was paid in full Y would be free to realise plot B and could be paid.

However, if X instead decided that the outstanding debt would be satisfied by the sale of plot B then the proceeds of sale of plot B would go to X initially, and Y would only receive a payment in the event that X’s debt was not fully paid.

If X was not fully paid from the proceeds of sale Y could end up with only a personal right against the debtor. This is not in the interests of the debtor. The interest of the debtor is to ensure that debts should be paid as fully as possible. So the law steps in to make an equitable adjustment to the default position. In the example given X is known as a catholic creditor, and Y is known as a secondary creditor and a series of rules apply to protect the secondary creditor’s interests.

The principles applicable to catholic and secondary creditors apply whether the securities are voluntary or involuntary. However, it appears that the rules do not apply where the catholic creditor has a floating charge: see Forth and Clyde later.

Question 65

W A Wilson, Debt, para 8.6 writes:

Answer 65

“Where there is one secondary creditor, the catholic creditor is not entitled to proceed so as to injure the secondary creditor while not obtaining any benefit himself.”

In effect this means that the catholic creditor should act in such a way as to leave the largest possible sum for the secondary creditor. However, this does not prevent the catholic creditor from realising plot B. Plot B may be more marketable. If the catholic creditor realises plot A and the debt due is satisfied the catholic creditor’s security over plot B will be discharged and the secondary creditor will be able to realise plot B and obtain payment. However, if the catholic creditor realises plot B the catholic creditor must assign his security over plot A to the secondary creditor.

Question 66

general sec and special sec

Answer 66

gen= often std sec
special security that only goes over debt
Some securities general/unrestricted (“all sums due and to become due”) ie creditor can charge asset with any debt due to him by that debtor. Others special/restricted ie creditor can charge only certain debts to that asset

Question 67

transfer rights in sec

Answer 67

follows the acceory principal

Question 68

the two rights for cred holding right in sec

Answer 68

the personal right against against the debtor for fulfilment of personal obl- when they assign the personal right they have to assign the right in the security and intimate to the debtor. if they do then no assignation
the real right in the encumbered subject
- there is an attempt to assign the claim to payment
there is an attemot to assign the right to sec
it matters if the right in sec is created by reg

Question 69

UK ACORN FINANCE LTD vsmith

Answer 69

uk arcorn was about transferring righ in sec had to assign the personal right and the real right which required reg of the std secHELD if it was to be a valid assignation the personal right of assignating by communicating and real right = the public act of reg the std sec would need to be sone

Question 70

enforcement in right of sec

Answer 70

Security can generally be enforced by sale. (Exception to the principle of nemo plus juris ad alium transferre potest quam ipse habet?) Obligation to get best price. Balance returned to debtor, or to other secured creditors.

The principal exception to this is the floating charge where the creditor has no power to realise the asset. But see also the landlord’s hypothec.
APPLY to court to get power to sell cred can sell as non owner. crd will get a real rihg agreement/ opledge no needed
where commercial need to serve a calling up notice = 2 month to comply OR notice by default= 1 month
RESIDENTIAL GO TO COURT

any money left from sale of house goes to debtor or other cred
FLOATING CHARGE GETS PRIORITY BEFORE UNSECURED CRED

.

Question 71

extoinction of right of sec

Answer 71

Extinction of rights in security

Rights in security can be extinguished in various ways including:

(a) following the accessory principle, extinction of the obligation (see payment and commercial paper for discussion of extinction of debts);
(b) discharge of the security;
(c) the destruction of the encumbered property
; (d) voluntary renunciation (in whole or in part) of the security by the creditor;
(e) confusio – where the holder of the security is also owner of the encumbered subjects
; (f) compulsory acquisition of the property; (
g) being struck down by the court under (i) vices of consent; (ii) the offside goals rule (see your lectures on property law – but note the special rule for offside goals where the competing real right is another right in security); (iii) the rules striking down unfair preferences (see the insolvency lectures later); and
(h) enforcement of the security