ACCOMODATION PARTY: REQUISITES
• 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 ACCOMODATION PARTY
• The accomodation party is generally regarded as a surety for the party accomodated• When the accomodation parties make payment to the holder of the notes, they have the right to sue the accomodated party for reimbursement since the relation between them is in effect that of a principal and sureties, the accomodation parties being the sureties
ACCOMMODATED PARTY CANNOT RECOVER FROM ACCOMMODATING PARTY
• Absence of consideration is a defense• In fact as between them, the understanding is that the accomodated party either is to
1. To reimburse the amount which the accomodation party may be obliged to pay
2. To pay the instrument directly to the holder
LIABILITY OF THE ACCOMODATION PARTY
• The accomodation 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 accomodation party• The accomodation 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 wasn't for accomodation
CORPORATIONS ARE NOT LIABLE AS ACCOMODATION PARTIES EVEN TO HOLDERS FOR VALUE
OFFICERS SIGNING FOR CORPORATION AS ACCOMODATION PARTY WITHOUT AUTHORITY TO DO SO FOR THEIR INDIVIDUAL DEBTS OR TRANSACTIONS ARE PERSONALLY LIABLE THEREON
HOLDER MUST OTHERWISE BE A HOLDER IN DUE COURSE
ACCOMODATION PARTY MAY ACCOMODATE ONE WHO IS NOT A PARTY TO THE INSTRUMENT
ACCOMODATION PARTY CAN INTERPOSE DEFENSE OF WANT OF
CONSIDERATION AGAINST ONE NOT HOLDER IN DUE COURSE.
