Accommodation Parties

Question 1

To be liable an accommodation party must

Answer 1

1) Sign the instrument; and

2) Not be a direct beneficiary of the value given for the instrument

Question 2

The Accommodation party’s liability depends on the capacity in which they sign

Answer 2

“guarantees collection- Must go after maker first

Guarantees payment- Can seek payment from either when not becomes due

Anomalous Indorsement- Accomodation party has secondary liability

Question 3

Legal rights of an accommodation party

Answer 3

Accommodation parties are entitled to:
1) Reimbursement from maker
2) Retribution from co-accommodation parties
3) Have the same defenses against payment that the accomodated party has

Question 4

An accommodation party is only liable when

Answer 4

1) The person entitled to enforce the instrument has reduced his claim to a judgement that has not been satisfied

2) The other party has become insolvent

3) The other party cannot be served with process

4) it appears useless to proceeds against the other party