RoaldDahl
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LSDefine
Simple English definitions for legal terms
accommodation party
Read a random definition: joint tenancy
A quick definition of accommodation party:
An accommodation party is someone who signs a piece of paper (called a negotiable instrument) to help someone else out. They don't get anything in return for doing this. The person they are helping is called the accommodated party. The accommodation party is responsible for paying the debt if the accommodated party can't. But the accommodated party promises to pay the debt and to make sure the accommodation party doesn't lose any money because of it.
A surety is someone who promises to pay someone else's debt if they can't. They are different from a guarantor because they are directly responsible for paying the debt. They don't get paid for doing this.
A more thorough explanation:
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.