CAUTION, in the law of Scotland, like guaranty (q.v.) in England, is an obligation undertaken by a second party, whereby he binds himself, failing the primary obligant, to fulfill his obligation, whether it be of a pecuniary nature or otherwise. Cautionary obligations, like engagements of guaranty, are thus essentially of a secondary nature; and, previous to the passing of the mercantile law amendment act (19 and 20 Vict. c. 60), it was customary in Scotland to distinguish between what was called cautionary proper, where the cautioner was hound avowedly as such, and improper ea utionam where both cantioner and principal were bound as principals. Since this period (1856), however, cautionary proper has ceased to exist otherwise than as the result of positive stipulation, under the saving clause attached to the eighth section of the statute referred to, which enacts that " nothing herein contained shall prevent any cautioner from stipu lating, in the instrument of C., that the creditor shall be bound, before proceeding against him, to discuss and do diligence against the principal debtor." Cautionary obligations are generally gratuitous, being, for the most part, undertaken from motives of friendship; but it is by no means uncommon for them to be entered into in consider ation of a premium paid by the person guaranteed, or by those interested in his fortanes. The existence of such a consideration has always been optional in Scotland, and this rule has recently been adopted in England (19 and 20 Vict. c. 97, 3). Where a premium is paid, the transaction becomes a mere insurance of solvency, honesty, or efficiency; and associations of great public utility (see GUARANTEE ASSOCIATION) have been formed, both in England and Scotland, for the purpose of undertaking, as a speculation, to guarantee the good conduct of persons employed either in public or private offices of trust. The tendency of judicial decisions, both in England and Scotland, for many years past, has been to require greater strictness than formerly in the constitution of cautionary obligations; and latterly, the legislature itself has stepped in with the same object in view. By the statute which we have already quoted, it is enacted that all such engagements shall be in writing, subscribed by the person undertaking or making them, or by some person duly authorized by him, otherwise they shall have no effect. If a cautionary obligation is dependent on a condition, it will, of course, be ineffectual unless the condition be complied with. The cautioner may, in general, plead every
defence which was competent to the principal debtor, and the extinction of the primary obligation extinguishes the secondary one. The discharge of one cautioner, moreover, unless consented to by the rest, is a discharge to all. Cautionary bound subsequent to the passing of the act mentioned, have, in consequence of the eighth section already referred to, no right to what in Scotland was called discussion (q.v.); but those bound prior to that act are entitled, as formerly, to require that the creditor shall first call on the principal debtor, and compel him to pay in so far as he is able, or in law language, discuss him. The cautioner is entitled, on payment of the obligation, to an assignation of the debt and diligence, by which means he comes, in all respects, into the creditor's place; and, moreover, if the solvency or other conditions of the principal debtor should seem precarious, lie may adopt legal measures for his relief. Co-cautioners, or persons bound together, whether their obligations he embodied in one or several deeds, are entitled to mutual relief. But, where a co-cautioner obtains relief from the others, he must communicate to them the benefit of any deduction or ease which may have been allowed him in paying the debt.
Cautionary obligations arc often undertaken in behalf of persons in situations in which the engagements and liabilities are prospective. In order that such obligations may be binding, the nature and extent of the liability must be fairly and fully disclosed to the cautioner. But while the cautioner must not be exposed to the danger arising from any transaction not in his view in entering into the contract, lie is not entitled to withdraw without due notice and a reasonable time being given for entering into a new arrangement. The queStion 'whether the effects of a bond arc prospective, or retrospec.
tive merely, will depend on its terms; the presumption, where these are in any way doubtful, being always in favor of the latter alternative. The creditor is bound to exer cise a certain degree of vigilance over the conduct and circumstances of the person guaranteed, and not to permit any very gross departure from the terms of the contract, to the prejudice of the cautioner. should this obligation be neglected, the cautioner will be freed from his obligation.