An accommodation party on a negotiable instrument
A)typically receives a direct benefit from the instrument.
B)is always primarily liable for the instrument.
C)is the same as a "guarantor" under the UCC.
D)has the same liability to a holder as the person for whom he signed.

Question

Quizplus · Accepted Answer

An accommodation party on a negotiable instrument is someone who signs the instrument, typically a promissory note or a check, in order to offer their creditworthiness to another party. The accommodation party does not receive any direct benefit from the instrument but is instead relying on the other party to take advantage of the credit. Under the UCC, an accommodation party is only secondarily liable for the instrument, meaning that they are liable to pay the amount due only if the primary obligor is unable to do so. However, an accommodation party's liability to a holder of the instrument is the same as the person for whom they signed, meaning that they may be sued for the full amount due if the primary obligor defaults.

An Accommodation Party on a Negotiable Instrument