Legal Definitions - accommodation maker

An accommodation maker is an individual or entity who signs a negotiable instrument, such as a promissory note or a check, to lend their creditworthiness to another person (known as the accommodated party). The accommodation maker does not receive any direct benefit from the transaction itself but agrees to be responsible for payment if the accommodated party fails to fulfill their obligation. Essentially, their signature acts as a guarantee, making it easier for the accommodated party to obtain a loan or credit.

• Example 1: Small Business Loan

  Maria wants to open a new coffee shop and applies for a business loan from a local bank. Because her business is new and she has limited collateral, the bank is hesitant to approve the loan based solely on her credit. Her aunt, who owns a successful established business and has excellent credit, agrees to sign the promissory note for the loan alongside Maria.

  In this situation, Maria's aunt is the accommodation maker. She is not receiving any of the loan money, nor will she directly benefit from the coffee shop's profits. Her sole purpose in signing the note is to lend her strong credit history to Maria, thereby reassuring the bank and making it more likely for Maria to secure the loan. If Maria's coffee shop struggles and she cannot repay the loan, her aunt, as the accommodation maker, would be legally obligated to pay the outstanding debt.

• Example 2: Car Loan for a Young Adult

  Liam, a recent college graduate, needs to purchase his first car but has no established credit history. When he applies for a car loan, the dealership's financing company is reluctant to approve him as the sole borrower. Liam's mother agrees to co-sign the loan agreement and the associated promissory note.

  Liam's mother acts as the accommodation maker. She is not the primary driver of the car and does not directly benefit from the loan proceeds. Her signature on the promissory note leverages her established credit to help Liam secure the car loan. Should Liam fail to make his car payments, his mother, as the accommodation maker, would be legally responsible for the outstanding debt.

• Example 3: Private Promissory Note

  Sarah needs to borrow money from a private lender, Mr. Henderson, to cover an unexpected home repair. Mr. Henderson is willing to lend the money but requires additional security due to the large sum. Sarah asks her friend, David, to sign a promissory note as a co-maker, agreeing that David will pay if Sarah defaults. David agrees, trusting Sarah but also understanding his legal commitment.

  David is the accommodation maker in this scenario. He is not receiving any of the money from Mr. Henderson, nor is he directly benefiting from Sarah's home repairs. His signature on the promissory note is purely to lend his credit and provide Mr. Henderson with greater assurance of repayment. If Sarah defaults on her repayment to Mr. Henderson, David, as the accommodation maker, would be legally responsible for the debt.