Accommodation Party Law and Legal Definition

Accommodation Party is term associated with commercial transactions. Accommodation Party is a person who signs negotiable instrument or commercial paper or agreement for the purpose of being a surety for another party (called accommodated party) to the instrument to help accommodated party obtain a loan or an extension of credit. Accommodation party can sign in any capacity such as maker, drawer, accepter, or endorser. Accommodation party signs negotiable instrument without any direct or indirect benefit, compensation, or consideration. Accommodation Party signs it as a favor to the person who owes money, and becomes liable on it to all parties except the accommodated party. Accommodated party agrees to pay the instrument and to indemnify accommodation party for any losses incurred in paying it. Generally accommodation is done when the creditworthiness of the accommodated party does not satisfy the person taking the negotiable instrument.

Accommodation Party is also called, in the case of a promissory note, an accommodation maker.