Also known as: cautio · cautions · cautioned · cautioning · cautioner · cautioners · cautionry · suretyship · surety
Written by attorneys · grounded in primary & secondary sources — see below
The element of the prudent-person standard that requires a trustee to proceed deliberately and avoid undue risk when administering a trust in light of its purposes, terms, distributional requirements, and other circumstances.
Cobalt Energy sues a former consultant for breach. During discovery the consultant withholds internal memos prepared after receiving a demand letter. The court denies Cobalt's motion to compel because the memos were created in anticipation of litigation and Cobalt has not shown substantial need or undue hardship in obtaining equivalent information elsewhere.
Canyon Construction serves as trustee of a family trust whose instrument stresses long-term preservation. Ignoring expert advice to limit timber harvests, Canyon authorizes aggressive cutting to increase immediate distributions. Beneficiaries sue, and the court finds Canyon breached the duty of prudent administration by failing to exercise reasonable care and caution.
Select any source to read its text and confirm it supports the definition.
Clifford Cox sells mortgaged land to Cascade Manufacturing. The deed recites assumption of the debt but the mortgagee gives no express release. Cox remains personally liable on the note because the transfer alone does not discharge the original obligor under suretyship principles.
Carmen Choi orally promises a supplier that she will pay the debt of her friend's business if the friend defaults. When the business fails, the supplier sues Choi. The court dismisses the claim because the oral promise to answer for the duty of another falls within the statute of frauds and is unenforceable without a signed writing.
Compass Logistics, trustee of a pension trust, hires an outside firm to manage all asset allocation. The trustee selects the firm after checking credentials, documents the scope of authority consistent with the trust's conservative goals, and reviews quarterly reports. Beneficiaries later challenge losses. The court holds the trustee satisfied its duty of care in delegation.
A city ordinance restricts extended family members from living together in a single home. The Court strikes the ordinance, noting that while substantive due process requires caution and restraint, arbitrary limits on family living arrangements lack sufficient justification under history and tradition.
A trustee must administer the trust as a prudent person would by considering the trust's purposes, terms, distributional requirements, and other circumstances, while exercising reasonable care, skill, and caution.
No. The trustee must also exercise reasonable care, skill, and caution in defining the scope and terms of the delegation and in monitoring the agent's performance over time.
A trustee may partition, sell, or exchange trust assets when doing so is consistent with the prudent-administration standard and the trust's purposes, even if the instrument is silent on investment restrictions.
…history of the Fourteenth Amendment in its reliance on the "compelling state interest" test. See Weber v. Aetna Casualty & Surety Co. , 406 U. S. 164, 179 (1972) (dissenting opinion). But the Court adds a new wrinkle to this test by transposing it from the legal considerations associated with the Equal Protection…