Cautionary Obligations Flashcards
Fortune v Young
A general offer to enter into a cautionary obligation is valid and can be enforced by anyone who acts on it
Scottish Pro Insurance v Pringle
If co-cautioners either all or none have to enter into the obligation, otherwise none is liable
RBS v Ranken
If cautionary obligation induced by unlawfulness. Any misrepresentation must be material and induce the cautioned to enter into the obligation
Smith v Bank of Scotland
In case of debtors misrepresent the creditor will not able to enforce the CO where the creditor is in breach of the duty of good faith
Barclays v O’Brien
Doctrine of constructive notice: creditor has to take certain steps to preserve their good faith.
Braithwaite v Bank of Scotland
Cautioned must prove both 1) breach of duty of good faith and 2) an actionable wrong by the debtor
Forsyth v RBS
If potential cautioned has independent legal advice then the duty of good faith is generally discharged
Harmer & Co v Gibb
Cautioned liable for the sum agreed to
Jackson v McIver
The cautioner’s liability can never exceed that the principal debtor
Smithy’s Place v Blackadder
Cautioners right to relief
Aitkens Trs v Bank of Scot
Termination - if cautioned consents to debtor’s release he is NOT released
Clayton’s Case
First debt in, first debt out
CA Johnstone v Duthie
Termination by principal debtor - giving time when debt is due and the creditor gives time to the debtor, he deprived himself of demanding immediate payment of the principal debt
NG Napier v Crosbie
Alteration of principal debt without the cautioner’s consent will release the latter - only what he agreed
RBS v Brown
Termination of Cautionary obligation by prescription. If neither relevant claim/acknowledgement of the existence of the obligation has been made within 5 years of it becoming enforceable.
