Accommodation Bill Definition
Accommodation Bill is signed by a third party called an accommodation endorser. This bill enables the second party to obtain a loan or credit for a specific purpose. An accommodation bill is endorsed by a reputable third party who stands as the guarantor for the second person to secure credit or a loan.
The accommodation endorser (guarantor) often accept to sign an accommodation bill as a favor for the second party, it has no attached. However, the guarantor must be trustworthy because he is liable for the credit secured by the second party who he stands for.
A Little More on What is an Accommodation Bill
In an accomodation bill arrangements, a creditor issues a note or an invoice to the obligee who is to repay the credit (commercial debt). The creditor otherwise called the lender drafts the accommodation bill which is accepted and endorsed by the debtor or borrower in a commercial exchange.
Generally, invoices are issued by the creditor to meet certain needs of debtors, invoices are kept till due date or until the credit is repaid. Certain invoices are called resident orders, these are invoices that are binding to detain friends, provide temporary support and provide loans.
Example of Accommodation Bill
Three methods can be used to process fees under accommodation bill arrangements. They are the following;
- Party accepting an invoice solely for ordering
In the process, parties that need credit open accounts that are accepted by friends without any consideration. In this scenario, if a party needs money urgently, he can give an invoice to his friend requesting funds. At the due time, the person who collected the fund pays to the friend that accepted the invoice which is then paid.
- A bill drafted for mutual benefit
In this scenario accommodation bills are assigned and influenced by mutual benefits. If Mr A attracts a bill which is accepted by Mr B with an agreement that some parts of the revenue will be sent to Mr B who accepted the bill, this is an instance of mutual benefit. Parties involved in this type of accommodation bill arrangement assign discounted fees at the same rate that align with the funds assigned to the account.
- When both parties request
If both parties request the same amount of money or different amounts at a time, both are liable for the cost of each invoice. However, the agreement of both invoices are respected and fulfilled at the appropriate time agreed upon.
References for Accommodation Bill
Academic Research for Accommodation Bill
The Negotiable Instruments Law, Ames, J. B. (1900). The Negotiable Instruments Law. Harvard Law Review, 241-257.
The Reacquisition of a Negotiable Instrument by a Prior Party, Chafee, Z. (1921). Columbia Law Review, 21(6), 538-553.
Defense of the Negotiable Instruments Law, Brewster, L. D. (1900). Yale LJ, 10, 84.
• Negotiable instruments and the federal courts in Antebellum American Business, Freyer, T. A. (1976). Business History Review, 50(4), 435-455.
The Negotiable Instruments Law: Its History and Its Practical Operation, Eaton, A. M. (1904). Michigan Law Review, 260-297.
Differences between the English and the German Law Relating to Negotiable Instruments, Crauford, W. G. (1957). International & Comparative Law Quarterly, 6(3), 418-441.
Rights of Remitters and Other Owners Not Within the Tenor of Negotiable Instruments, Beutel, F. K. (1927). Minn. L. Rev., 12, 584.
Consideration and Value in Negotiable Instruments, Wickhem, J. D. (1924).
Bills and Notes, Chafee, Z. (1919). Harvard Law Review, 33(2), 255-280.
The development of mercantile instruments of credit in the United States, Klein, J. J. (1911). Journal of Accountancy (pre-1986), 12(000008), 594.
Uniform Negotiable Instruments Law Is It Producing Uniformity and Certainty in the Law Merchant, Hening, C. D. (1910). U. Pa. L. Rev., 59, 471.
The Uniform Negotiable Instruments Law, Is It Producing Uniformity and Certainty in the Law Merchant? II, Hening, C. D. (1911). University of Pennsylvania Law Review and American Law Register, 59(8), 532-553.