Accommodation Bill in United Kingdom

Definition of Accommodation Bill

In accordance with the work A Dictionary of Law, this is a description of Accommodation Bill : A bill of exchange accepted by an accommodation party, i.e. a person who signs without receiving value and for the purpose of lending his name (i.e. his credit) to someone else. An accommodation party is liable on the bill to a *holder for value.

Accommodation Bill to Obtain Credit

An accommodation bill may be described as a bill given without receipt of value, in order that the person to whom it is given may raise money and obtain credit by means of it. Ordinarily, the person who lends his name accepts a bill drawn on him by the person he wishes to accommodate, but sometimes a bill is drawn, accepted, and indorsed by different persons, in order to accommodate some person who is not a party to the bill at all. Perhaps the strict legal definition of an accommodation bill would be a bill whereon the principal debtor, according to the terms of the instrument, is in substance a mere surety for some other person, whether that person be a party to the bill or not. When an accommodation bill gets into the hands of a holder for value he may enforce payment of it precisely in the same way as if the bill had been given for value. When, however, an accommodation bill is dishonoured, some special considerations come into play.

In the first place a drawer or indorser for whose accommodation the bill was accepted cannot set up as a defence either absence of notice of dishonour or informality in presentment for payment, for he was the party primarily liable to meet the bill. Secondly, if the bill be held by a person who knows the real relationship of the parties, the ordinary rule of the law of principal and surety then attaches, and a discharge of. or binding agreement to give time to, the principal debtor may discharge the surety. For instance, suppose the holder of a bill knows that it was accepted to accommodate the drawer. If it is dishonoured, he may sue either the acceptor or the drawer, or both ; but if, for some fresh consideration, he agrees with the drawer not to press him for (say) three months, he thereby discharges the acceptor. So if a joint and several note is made by three persons, two of whom sign to accommodate the third, and the holder accepts a non-statutory composition from such third person, the two co-makers who signed to accommodate him would ordinarily be discharged. [1]

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Notes

1. Robert Harry Inglis, Sir, Dictionary of Political Economy, Vol. 1, 1915

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