Ark. Code Ann. § 4-3-419 (2026)
Instruments signed for accommodation
- 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.”
- An accommodation party may sign the instrument as maker, drawer, acceptor, or indorser and, subject to subsection (d), 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.
- 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 § 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.
- 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.
- If the signature of a party to an instrument is accompanied by words indicating that the party guarantees payment or the signer signs the instrument as an accommodation party in some other manner that does not unambiguously indicate an intention to guarantee collection rather than payment, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument in the same circumstances as the accommodated party would be obliged, without prior resort to the accommodated party by the person entitled to enforce the instrument.
- 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. In proper circumstances, an accommodation party may obtain relief that requires the accommodated party to perform its obligations on the instrument. An accommodated party that pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.
History. Acts 1991, No. 572, § 5; 2005, No. 856, §§ 38, 39.
RESEARCH REFERENCES
U. Ark. Little Rock L. Rev.
Survey of Legislation, 2005 Arkansas General Assembly, Business Law, 28 U. Ark. Little Rock L. Rev. 321.
Case Notes
Accommodation Party.
Whether party was an accommodation signer is an issue of fact. Womack v. First State Bank, 21 Ark. App. 33, 728 S.W.2d 194 (1987) (decision under prior law).
The intention of the parties is the most significant element in determining accommodation status, and where a person receives no direct benefit from an executed note, it is likely that he will be regarded as the accommodation party. Mobley v. Harmon, 304 Ark. 500, 803 S.W.2d 900 (1991) (decision under prior law).
Summary judgment was granted to a bank pursuant to Ark. R. Civ. P. 56 in its action seeking recovery under a guaranty agreement by a physician where it was determined that the physician received a direct and substantial benefit when he was released from a payment obligation to his medical practice purchaser and, accordingly, he was personally obligated rather than just being an accommodation party pursuant to this section. Cranfill v. Union Planters Bank, N.A., 86 Ark. App. 1, 158 S.W.3d 703 (2004).
Defenses.
Where before the surety has undertaken his obligation the creditor knows facts unknown to the surety that materially increase the risk beyond what the creditor has reason to believe the surety intends to assume, and the creditor also believes that these facts are unknown to the surety, and had reasonable opportunity to communicate them to the surety, creditor's failure to notify the surety of such facts is a defense to the surety. Camp v. First Fin. Fed. Sav. & Loan Ass'n, 299 Ark. 455, 772 S.W.2d 602 (1989) (decision under prior law).
Where the bank assigned the note to the accommodator, he became holder of the note, and though ordinarily a holder takes a note assignment subject to all defenses which the maker had against the bank, an accommodation maker has an independent cause of action against the party accommodated; consequently, maker's right of recourse was unencumbered by any defenses the accommodated party held against the bank. Mobley v. Harmon, 304 Ark. 500, 803 S.W.2d 900 (1991) (decision under prior law).
Instrument Taken for Value Before Due.
Although maker of note to secure payments on automobile alleged that he was an accommodation party, having signed to accommodate his mother, he was liable in any case, since when an instrument is taken for value before it is due, accommodation party is liable in the capacity in which he signed. Wheeless v. Eudora Bank, 256 Ark. 644, 509 S.W.2d 532 (1974) (decision under prior law).
Knowledge of Other Party.
It is no defense to an action on a note by an assignee thereof that the defendant was an accommodation endorser and that the assignee knew of that fact at the time of its purchase of the note. Rushton v. U.M. & M. Credit Corp., 245 Ark. 703, 434 S.W.2d 81 (1968) (decision under prior law).
Knowledge of the other party that defendant was an accommodation endorser did not relieve defendant of liability. National Surety Corp. v. Crystal Springs Fishing Village, Inc., 326 F. Supp. 1171 (W.D. Ark. 1971) (decision under prior law).
Purpose of Signature.
A wife who, with her husband, signed a note to obtain money to build a home which they owned as tenants by the entirety received benefits from the note and, therefore, could not be an accommodation signer. Riegler v. Riegler, 244 Ark. 483, 426 S.W.2d 789 (1968) (decision under prior law).
Nonshareholders of corporation which received money who signed the note on the back only when asked to do so by the bank were accommodation endorsers with right of recourse to recover, from the shareholders who executed the note, any payment made by them, even though they had a contract from the corporation to obtain financing for the project involved. Hanson v. Cheek, 251 Ark. 897, 475 S.W.2d 526 (1972) (decision under prior law).
Where the plaintiff's purpose in signing a mortgage note as security for a loan obtained by his corporation was not solely to lend his name as a surety to the other comakers, but was primarily to benefit his business interests, the plaintiff was not an accommodation endorser, and therefore, he was not entitled to foreclose the mortgage lien on the defendant's property. Nelson v. Cotham, 268 Ark. 622, 595 S.W.2d 693 (1980) (decision under prior law).
Release from Liability.
As to whether a guarantor is released from an obligation, unless the guarantor is notified and consents to material changes, the test is whether there was a “material alteration” of the agreement, so as to discharge the guarantor. Worthen Bank & Trust Co. v. Utley, 748 F.2d 1269 (8th Cir. 1984) (decision under prior law).
Where guarantor was liable to bank on three promissory notes, the actual terms of which were never materially altered, and it was clear from the evidence that nothing was done in this regard without guarantor's knowledge or consent; guarantor was not released from personal liability on notes. Worthen Bank & Trust Co. v. Utley, 748 F.2d 1269 (8th Cir. 1984) (decision under prior law).
Cited: Stevens v. Heritage Bank, 104 Ark. App. 56, 289 S.W.3d 147 (2008).