Legal Definitions - accommodation party

An accommodation party is a person who signs a negotiable instrument, such as a promissory note or a check, without receiving any benefit or compensation. The purpose of signing is to act as a surety for another party, known as the accommodated party. The accommodation party can sign in any capacity, such as a maker, drawer, acceptor, or indorser.

The accommodated party is responsible for paying the note or draft and indemnifying the accommodation party for any losses incurred in having to pay it. The accommodation party is liable to all parties except the accommodated party.

John signs a promissory note for his friend, Tom, who needs a loan to start a business. John does not receive any benefit or compensation for signing the note. John is the accommodation party, and Tom is the accommodated party. If Tom fails to pay the loan, John will be responsible for paying it and seeking reimbursement from Tom.

Another example is when a parent co-signs a student loan for their child. The parent is the accommodation party, and the child is the accommodated party.

These examples illustrate how an accommodation party assumes liability for another party's debt or obligation without receiving any benefit or compensation.