Accommodation Party

• Author: Jeffrey Lehman, Shirelle Phelps

Page 55

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, or an accommodation maker, because he or she must sign the note with the accommodation party.

An accommodation party is liable to the person or business that...