One who becomes a party to a negotiable instrument in order to lend his credit to another is called an accommodation maker, drawer, indorser, or acceptor as the case may be.
Just as one may become surety for another in any form of indebtedness, so one may lend his credit to another by signing a negotiable instrument. Such party is bound notwithstanding he receives no benefit from his act, and although any one who takes the instrument for value knows that he takes no benefit. Thus a party may for another's accommodation sign as maker of a note, drawer or acceptor of a bill or indorser of a bill, note, or check. In such a case there are always two parties, at least, besides the accommodating party, namely, the accommodated party and the one who extends credit to him, otherwise no rights can arise.
Example 33. A makes a note to order of B for B's accommodation. Unless B uses this note by selling it for value to C, A is not bound thereon. But if B does transfer to C for value, C may sue A, although C knows that A got nothing, for the purpose of the note was accommodation. This is not the case of a note lacking consideration.76
76. Nego. Instru. Act, SEC. 29; Wilbour v. Hawkins, 38 R. I. 119, 94 Atl. 856.
In the same way one may become joint maker with the accommodated party upon a note, or draw or accept a bill or indorse any commercial paper in order that his name may give the paper a value which it would not otherwise have.
One who signs as an accommodation party and who has to pay the instrument by reason thereof has his right of reimbursement against the person who should have paid it.
Whether an accommodation paper is enforceable by one who secures it after maturity with knowledge of its character can enforce it is questionable under the act.76a In a recent case it was held that it could be so negotiated, but this view has been strongly criticized as contrary to the intention of the accommodation and of business custom.76b In Illinois, the act restricts transfer after maturity unless there is proof that such transfer was intended.
Acceptance for honor consists likewise in a lending of credit. One who accepts for honor differs from one who accepts for another's accommodation in the fact that an accommodation acceptor is the drawee named in the bill. He accepts for some other person's benefit but the bill was drawn on him that he might so accept it. But an acceptor for honor is one who is no party to the bill, but becomes such by intervention, and who
76a. Marline v. Jones, 138 Wis. 82, 119 N. W. 931. 76b. Brannan, Nego. Instru. Law, 3rd. Ed., p. 123.
volunteers to assume the place of the drawee of such bill, and to do what such drawee should have done or was expected to do.
An acceptance may be for the honor of any one on the bill, but it is presumed, if not otherwise stated, to be for the honor of the drawer.
The acceptance for honor may be for part only of the sum for which the bill is drawn. It must state that it is for honor and be signed by the acceptor for honor.
The acceptor for honor becomes liable to all parties who are subsequent to the party for whose honor the acceptance is made.
The bill so accepted must be presented to the drawee when due for payment and protested for nonpayment before the acceptor for honor can be made to pay it. This is true although there may be small hope that the drawee will pay it, as he has already refused to accept it when it was presented to him for that purpose.
The acceptor for honor will be discharged unless the bill is presented to him for payment within one day after its maturity, or if he resides in some other place unless it is put in the mails within twenty-four hours after such date of maturity.
In connection with this Section read Sections 161-170 in Appendix A.
Acceptance for honor is also called acceptance supra protest.
Payment for honor consists in payment by some other party than the drawee or the acceptor for the honor of some party liable on the bill accepted or for whose account such bill was drawn.
Payment for honor is for the same purpose as acceptance for honor, and consists in the intervention of some one to take the place of the drawee or acceptor named in the bill where such bill has been presented to the drawee or acceptor for payment, and protest for nonpayment has been made. A bill might be protested for nonpayment where it had been accepted or where it had not been accepted, for we shall find that it is not always necessary to present a bill for acceptance, but sometimes it is sufficient to simply present it for payment when due.
A payment for honor must be stated to be such and must be attested by a "notarial act of honor which may be appended to the protest or form part of it." This notarial act must set forth the declaration of the payer that he pays the bill for honor and for whose honor he pays it.
One who pays for honor and who properly saves his rights succeeds to the rights of the holder against the person for whose honor he pays and parties liable to the latter.
In connection with this Section read Sections 171-177 in Appendix A.