Appropriation when Account is Guaranteed meaning

appropriation when account is guaranteed describes how a bank allocates credits paid into a customer’s account that is supported by a third‑party guarantee, determining whether those credits reduce the guaranteed indebtedness or other liabilities. It is not a statutory term but a common law concept drawing on rules on appropriation (or imputation) of payments and guarantees, including the rule in Clayton’s Case for running current accounts. Key features: - The debtor may stipulate how a payment is appropriated; if not, the bank may do so by clear notice; failing either, the law applies payments in order of time (for current accounts, first‑in, first‑out under Clayton’s Case). - On revocation of a continuing guarantee of a current account, the guaranteed sum typically crystallises at the balance then due; subsequent receipts will, absent bank appropriation, reduce that balance under Clayton. Banks often break the account or open a new account to ring‑fence post‑revocation transactions. - An appropriation that unfairly prejudices the guarantor (cautioner in Scotland) may discharge the guarantor to that extent. Usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland (Scots law uses “imputation” and “cautioner”). Guarantees frequently include express appropriation and account‑splitting clauses to manage these risks.