Negotiable Instruments Law | Finals Reviewer
Sec. 29. Liability of accommodation party. - An
accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to
some other person. Such a person is liable on the instrument
to a holder for value, notwithstanding such holder, at the time
of taking the instrument, knew him to be only an
accommodation party.
Definition of Terms
1. Accommodation note or bill – is one which the
accommodation party has put up its name, without
consideration, for the purpose of accommodating some
party who is to use it, and is expected to pay it.
2. Accommodation party – is one who has signed the
instrument as maker, drawer, acceptor, indorser,
without receiving value for the signature and for the
purpose of lending his name to some other person.
3. Accommodated party – is one whose favor a person,
without receiving value therefore, signs an instrument
for the purpose of lending his credit and enabling said
party to raise money upon it.
Parol evidence to prove accommodation
 The accommodation party is permitted to show by parol
evidence which party he accommodated. If this were
not so, an accommodated party may enforce payment
against the accommodation party
Liability of accommodation party to a holder
1. Absence of consideration not a defense – “Such a
person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation
party. “ This means that want or absence of
consideration is not a valid defense against the holder
for value by the accommodation party. Such defense
may only be available against the accommodated party
2. Rule NOT applicable to corporations – because the
issue or indorsement of negotiable paper by a
corporation without consideration and for
accommodation of another is Ultra Vires. Who is liable
then? Those who signed (Piercing the veil of corporate
fiction)
3. Accommodation party, in effect, a surety – Rights of accommodation party
Accommodation party is in effect a surety, the
accommodated party being the principal. 1. Right to revoke accommodation
2. Right to reimbursement from accommodated party
3. Right to contribution from other solidary
accommodation maker
4. Right of accommodation party to notice of default
or delinquency of the accommodated party – an Kinds of Accommodation party
accommodation party has a right to be properly
appraised of the default or delinquency of the *Primarily liable
accommodated part because of solidary liability
*Secondarily liable
1. Accommodation Maker (PL)
5. Where instrument vitiated by an illegality of cause 2. Accommodation Drawer (SL)
– No recovery by a payee against an accommodation 3. Accommodation Acceptor (PL)
party 4. Accommodation Indorser (SL)

6. Liability of solidary accommodation makers –

Sadaya vs Sevilla, three accommodation makers
executed jointly and severally in favor of a bank, it has
been held that anyone of the solidary accommodation
makers may be held liable.
 Accommodation Party Regular Party
Signs an instrument without For value
receiving value therefor
Signs the instrument for the Does not sign for that
purpose of lending his name purpose

May always show parol Cannot disclaim or limit his

evidence personal liablity
Cannot avail the defense of May avail of such defense
absence or failure of against a HNIDC
consideration against a
HNIDC
After paying the holder, may May not sure any subsequent
sure for reimbursement the party for reimbursement
accommodated party,
although a subsequent party

Cases
Sadaya vs Sevilla
Three accommodation makers executed jointly and severally
in favor of a bank, it has been held that anyone of the solidary
accommodation makers may be held liable.