Cautionary in Scots Law

Q3. Explain the function of a cautionary in Scots law and detail the rights of the cautioner as well as the extent of their liability?

http://www.legislation.gov.uk/ukpga/2015/15/contents/enacted

Cautionary obligations

  • It may give lenders comfort
  • It is a personal obligation given by a third party in respect of an obligation of a principal debtor
  • It is therefore an accessory obligation
  • May be debt or may be obligation ad factum praestandum
  • May be gratuitous
  • Parent guaranteeing child’s obligations
  • May be onerous
  • Bank guaranteeing developes obligations under building contract
  • No special form

Writing – Generally, cautionary obligations do not require to be committed to writing in order to be validly constituted, but there are important exceptions to that rule. S1 (2) (a) (ii) of the Requirements of Writing (scot) Act 1995 stipulates that writing is required for the proper constitution of a cautionary obligation where it is a gratuitous unilateral obligation not undertaken in the course of business.

Where a cautionary obligation amounts to a security or guarantee for a regulated agreement under the Consumer credit act 1974 s105 states it MUST be in writing and executed by the cautioner.

Accessory obligation – A cautionary obligation is accessory in nature. Therefore, it is not an independent principle which stands on its own and it cannot exist without linkage to an independent principle obligation between a debtor and creditor. If you are looking for notary work experience, visit the site

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