What is an Accommodated Party? A Comprehensive Legal Overview

Q: Can an accommodation party also be a beneficiary?

No, an accommodation party does not benefit from the transaction; they only incur liability to support the accommodated party.

Q: What should I consider before signing as an accommodation party?

Evaluate the risks involved, as you will be responsible for the obligations outlined in the agreement, even if you do not benefit from it.

Definition & Meaning

An accommodated party is a person who benefits from a financial instrument, such as a loan or promissory note, that is signed by another individual known as the accommodation party. The accommodation party signs the instrument to help the accommodated party, taking on liability for the obligations outlined in the document, even though they do not receive any direct benefit from the value exchanged. This arrangement is often used in financial transactions to provide support or credit to individuals who may not qualify on their own.

Table of content

Legal Use & context

The term "accommodated party" is primarily used in financial law and commercial transactions. It is relevant in situations involving loans, guarantees, and other instruments where one party signs to support another. Understanding this term is crucial for individuals involved in borrowing or lending money, as it clarifies the responsibilities and liabilities of each party. Users can manage related forms and agreements through resources like US Legal Forms, which provide templates drafted by legal professionals.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A parent co-signs a loan for their child to help them secure financing for a car. In this case, the child is the accommodated party, while the parent is the accommodation party who takes on the loan's liability.

Example 2: A business owner seeks a loan but lacks sufficient credit history. A friend agrees to sign the loan agreement as an accommodation party, allowing the business owner to access funds. Here, the business owner is the accommodated party.

Relevant laws & statutes

Pursuant to the Uniform Commercial Code (UCC) § 3-103, the definition and implications of accommodated parties and accommodation parties are outlined. This statute provides the legal framework for understanding the roles and responsibilities of each party in financial instruments.

Comparison with related terms

Term	Definition	Key Difference
Accommodation Party	The person who signs an instrument to provide support to the accommodated party.	They incur liability without receiving a benefit.
Beneficiary	The person who receives benefits from a financial instrument or agreement.	The beneficiary is the direct recipient of the value, unlike the accommodation party.

Common misunderstandings

What to do if this term applies to you

If you are considering signing as an accommodation party, ensure you understand the financial implications and liabilities involved. It may be beneficial to consult with a legal professional to assess your situation. Additionally, you can explore US Legal Forms for templates that can help you draft the necessary agreements.

Find the legal form that fits your case

Browse our library of 85,000+ state-specific legal templates.

This field is required

Quick facts

Commonly used in financial transactions, such as loans and guarantees.
Involves two parties: the accommodated party and the accommodation party.
Liability is incurred by the accommodation party, who does not benefit directly.

Key takeaways

Frequently asked questions

What is the role of an accommodated party?

The accommodated party is the individual who receives the benefit of a financial instrument, such as a loan.