Accommodation Party

Author:Jeffrey Lehman, Shirelle Phelps

One who signs a COMMERCIAL PAPER for the purpose of lending his or her name and credit to another party to the document?the accommodated party?to help that party obtain a loan or an extension of credit.

A person wanting to obtain a car loan, for example, may offer a finance company a promissory note for the amount of the requested loan, promising to repay the amount over a number of years. If the company does not consider the person a good credit risk (one who will be able to repay the loan), it will request that someone else sign the note to ensure that the company will be repaid. Such a person may be an accommodation endorser, because he or she endorses the note after it has been completed,...

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