§ 4-3-419 — Instruments signed for accommodation

(a) If an instrument is
issued for value given for the benefit of a party to the instrument (accommodated
party) and another party to the instrument (accommodation party) signs the
instrument for the purpose of incurring liability on the instrument without being a
direct beneficiary of the value given for the instrument, the instrument is signed by
the accommodation party for accommodation.

(b) An accommodation party may sign the instrument as maker, drawer,
acceptor, or indorser and, subject to subsection (d) of this section, is obliged to pay
the instrument in the capacity in which the accommodation party signs. The
obligation of an accommodation party may be enforced notwithstanding any
statute of frauds and whether or not the accommodation party receives
consideration for the accommodation.

(c) A person signing an instrument is presumed to be an accommodation
party and there is notice that the instrument is signed for accommodation if the
signature is an anomalous indorsement or is accompanied by words indicating that
the signer is acting as surety or guarantor with respect to the obligation of another
party to the instrument. Except as provided in section 4-3-605, the obligation of an
accommodation party to pay the instrument is not affected by the fact that the
person enforcing the obligation had notice when the instrument was taken by that
person that the accommodation party signed the instrument for accommodation.

(d) If the signature of a party to an instrument is accompanied by words
indicating unambiguously that the party is guaranteeing collection rather than
payment of the obligation of another party to the instrument, the signer is obliged
to pay the amount due on the instrument to a person entitled to enforce the
instrument only if (i) execution of judgment against the other party has been
returned unsatisfied, (ii) the other party is insolvent or in an insolvency proceeding,
(iii) the other party cannot be served with process, or (iv) it is otherwise apparent
that payment cannot be obtained from the other party.

(e) An accommodation party who pays the instrument is entitled to
reimbursement from the accommodated party and is entitled to enforce the
instrument against the accommodated party. An accommodated party who pays
the instrument has no right of recourse against, and is not entitled to contribution
from, an accommodation party.

Legislative History

Source: L. 94: Entire article R&RE, p. 871, � 1, effective January 1, 1995.