Section 3–415. Contract of Accommodation Party.

Terms Used In N.Y. Uniform Commercial Code 3-415

  • Contract: A legal written agreement that becomes binding when signed.
  • Dependent: A person dependent for support upon another.
  • Instrument: means a negotiable instrument. See N.Y. Uniform Commercial Code 3-102
  • Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC

(1) An accommodation party is one who signs the instrument in any capacity for the purpose of lending his name to another party to it.

(2) When the instrument has been taken for value before it is due the accommodation party is liable in the capacity in which he has signed even though the taker knows of the accommodation.

(3) As against a holder in due course and without notice of the accommodation oral proof of the accommodation is not admissible to give the accommodation party the benefit of discharges dependent on his character as such. In other cases the accommodation character may be shown by oral proof.

(4) An indorsement which shows that it is not in the chain of title is notice of its accommodation character.

(5) An accommodation party is not liable to the party accommodated, and if he pays the instrument has a right of recourse on the instrument against such party.

(6) An accommodation party warrants to any subsequent holder who is not the party accommodated and who takes the instrument in good faith that

(a) all signatures are genuine or authorized; and

(b) the instrument has not been materially altered; and

(c) all prior parties had capacity to contract; and

(d) he has no knowledge of any insolvency proceeding instituted

with respect to the maker or acceptor or the drawer of an

unaccepted instrument.

  Previous section
Next section  
 Part 4 Contents