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LIABILITY OF

ACCOMMODATION
PARTY IN NEGOTIABLE
INSTRUMENTS
THE NEGOTIABLE INSTRUMENTS LAW
• Sec. 29. Liability of accommodation party
An accommodation party is one who has signed
the instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of
lending his name to some other person. Such a person is
liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation party.
ACCOMMODATION PARTY:
One who has signed the instrument as maker,
drawer, indorser, acceptor, without receiving any value
therefore and for the purpose of lending his name to
some other person.
Requisites:
1. He must be a party to the instrument, signing as maker,
acceptor, indorser, or drawer.
2. He must not receive any value therefore.
3. He must sign for the purpose of lending his name or
credit.
RIGHTS AND LEGAL POSITION OF AN
ACCOMMODATION PARTY

1.The accommodation party is generally regarded as a


surety for the party accommodated.
2. When the accommodation parties make payment to the
holder of the notes, they have the right to sue the
accommodated party for reimbursement since the relation
between them is in effect that of a principal and
sureties, the accommodation parties being the sureties.
ACCOMMODATED PARTY CANNOT RECOVER
FROM
ACCOMMODATING PARTY
A. Absence of consideration is a defense.
B. In fact as between them, the understanding is that
the accommodated party either is:

1. To reimburse the amount which the accommodation


party may be obliged to pay.
2. To pay the instrument directly to the holder.
LIABILITY OF THE
ACCOMMODATION PARTY
1.The accommodation party is liable on the instrument
to a holder in value, notwithstanding such holder
at any time of the taking of the instrument knew
him to be only an accommodation party.
2. The accommodation party doesn't receive any
valuable consideration for the instrument he signs but
he is liable to a holder for value as if the contract was not
for accommodation.
1. CORPORATIONS ARE NOT LIABLE AS ACCOMMODATION
PARTIES EVEN TO HOLDERS FOR VALUE.

2. OFFICERS SIGNING FOR CORPORATION AS


ACCOMMODATION PARTY WITHOUT AUTHORITY
TO DO SO FOR THEIR INDIVIDUAL DEBTS OR
TRANSACTIONS ARE PERSONALLY LIABLE THEREON.

3. HOLDER MUST OTHERWISE BE A HOLDER IN DUE COURSE.

4. ACCOMMODATION PARTY MAY ACCOMMODATE ONE


WHO IS NOT A PARTY TO THE INSTRUMENT.

5. ACCOMMODATION PARTY CAN INTERPOSE DEFENSE

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