ACCOMMODATION BILL. A bill to which a person, called an accommodation party, puts his name to oblige or accommo date another person without receiving any consideration for so doing. The position of such a party is. in fact, that of a surety or guarantor. Bills of this type are commonly called " kites," or " windmills," or " wind bills." A may accept a bill for the accom modation of B the drawer, who is in need of money. A receives no consideration and does not expect to be called upon to pay the bill when due. B raises the neces sary funds by discounting the bill, expect ing that, at maturity, he will be in a posi- ' tion to meet the bill himself. If, how ever, he fails to do so, a holder for value, even though he knew it was an accommoda tion bill when he took it, can sue the acceptor and prior indorsers. But until value has been given, no one is liable on such a bill. When a banker discounts an accommodation bill he becomes a holder for value.
The Bills of Exchange Act, 1882, Section 28, defines an accommodation bill and the liability of an accommodation party as follows : " (1) An accommodation party to a bill is a person who has signed a bill as drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.
" (2) An accommodation party is liable on the bill to a holder for value ; and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party or not." By Section 46, s.s. 2, presentment for pay ment is dispensed with : " (c) As regards the drawer, where the drawee or acceptor is not bound, as between himself and the drawer, to accept or pay the bill, and the drawer has no reason to believe that the bill would be paid if presented.
"(d) As regards an indorser, where the bill was accepted or made for the accommodation of that indorser and he has no reason to expect that the bill would be paid if presented."
Notice of dishonour is dispensed with, by Section 50, s.s. 2 : " (c) (4) Where the drawee or acceptor is as between himself and the drawer under no obligation to accept or pay the bill ; " (d) As regards the indorser, " (3) Where the bill .vas accepted or made for his accommodation." But to preserve the holder's rights against any prior parties the bill should be presented for payment at maturity.
By Section 59, s.s. 3 :—" Where an accom modation bill is paid in due course by the party accommodated, the bill is discharged." Where a banker discounted a bill for the drawer, a customer, and was informed, after the bill was dishonoured, that it was an accommodation bill, and the banker agreed, at the drawer's request, not to apply to the acceptor but to depend upon him (the drawer), and his account afterwards showed a credit balance larger than the amount of the bill, it was held in Marsh v. Hozdditch (an unreported case tried in 1818, and cited in Chitty, " Bills of Exchange," 11th ed., p. 290), that the banker was bound to have applied the balance in payment of the bill and that the acceptor was discharged. In his judgment, Mr. Justice Abbott said, " The banking account of the drawer with the plaintiffs having at one time, after the bill was due, been in his favour to a larger amount than the bill, the plaintiffs (the bankers) were bound to apply the balance in discharge of that bill, and could not keep it as a security for a fluctuating balance which might ultimately become due to them." (See BILL OF EXCHANGE.)