Research On The Accommodation Paper

Negotiable instrument is not only a tool of payment and exchange but also a tool of financing. With the constant emergence of new-type payment and exchange, the function of financing further emphasizes the value of negotiable instrument. How to ensure the full exertion of the negotiable instrument's function of financing is a very important issue of the law of negotiable instrument. Accommodation paper system in UK and US is a system that exerts the credit and financing function of negotiable instrument to the extreme. And the study of accommodation paper system has very strong theoretical and practical significance.I have four chapters in the paper as follows:The first chapter demonstrates the basic part of system of the accommodation paper."Accommodation party"and"accommodation paper"are the basis of accommodation paper system. British leading cases and theories mainly believe that there is no necessary corresponding relationship between accommodation party and accommodation paper. The formation of accommodation paper not only requires the signature of accommodation party but also demands the accommodation party should sign in the name of the acceptor or the maker. However American leading cases and theories believe that there is necessary corresponding relationship between accommodation party and accommodation paper and the paper with accommodation party's signature is accommodation paper.There are three requirements for being an accommodation party: first, signature on the bill;second,the signer doesn't receive value due to the signature;third, the purpose of signature is for others to use it. The signer is considered as accommodation party when the signer sign via an anomalous endorsement or the signature is accompanied by the signature of surety or guarantor. If the signer doesn't sign via an anomalous endorsement or the signature is not accompanied by the signature of surety or guarantor, the signer who is in the name of accommodation party should bear the burden of proof for the above-mentioned three items. The proof of the first item is usually written negotiable instrument without any suspicion. The usual suspicion is how to prove the possession of the third item. In practice, the possession of the third item is usually realized through the possession of the second item. That is to say, when there is enough evidence to prove that accommodation party doesn't receive value due to the signature, the judge can infer that the purpose of signature is for others to use it. Therefore, the key to the proof of whether signer is accommodation party is how to testify that the signer doesn't receive value due to the signature.How to understand the signer doesn't receive value due to the signature?Researchers have different points of view toward it. The author believes that"the signer doesn't receive value due to the signature"means the signer doesn't receive value for bearing the liability for negotiable instrument. Or in other words, the signer doesn't receive value for negotiable instrument. Value means what a promiser takes in return for his promises. Only when the promises are carried out forcibly will the value be significant. Promises actually assure the promise-takers. The signature of the accommodation party on the negotiable instrument is actually making the holders believe that accommodation party will bear the responsibility of payment for the rights on the bill of exchange. The promise-taker of the accommodation party is the holder. But the relationship of credit receiving and giving between the accommodation party and the holder is carried out by the accommodated party. The holder doesn't deal with the accommodation party directly while the accommodated party deals with the holder directly. The benefit that holder gives up for winning the right of bill is directly gained by the accommodated party. That is to say that the accommodated party is the direct recipient and beneficiary of the value. In this sense, the accommodation party doesn't receive value. Therefore,"the accommodation party doesn't receive value"in the British and American negotiable instrument law means the accommodation party doesn't benefit from the person with the right of the bill rather than that accommodation party doesn't benefit from the accommodated party.Accommodation party's right is the core issue in accommodation paper system. The purpose of the signature of the accommodation party is to lend his credit to others to use, which decides that the accommodation party doesn't bear any obligation for negotiable instrument for the accommodated party. When the accommodated party claims the rights of negotiable instrument, the accommodation party has the right to defense. In the US, the accommodation party is seen as the surety of the accommodated party.Therefore, the common law endows the guarantors with exoneration,subrogation,reimbursement which are also enjoyed by accommodation party. Accommodation party should bear the obligation for his signature on the negotiable instrument. Accommodation party should not go against holder by the accommodation contract. But the accommodation party enjoys"derivative defenses"and"suretyship defenses"for the holder."Derivative defenses"means that the accommodation party borrows the right of defense from the accommodated party .Exceptionally speaking; the accommodation party should not demur to the holder for the bankruptcy, infancy or lack of legal capacity of the accommodated party. Moreover, the accommodation party should not borrow the accommodated party's counterargument right of person to demur at the holder in due course."Suretyship defenses"is the accommodation party's own counterargument right including defense against deferment, debt alteration, depreciation of guaranty. There are also exceptions to"suretyship defenses". When the holder doesn't know the existence of the accommodation party's signature or the accommodation party agrees that holder reserves the rights, the accommodation party can not claim the right of defense against the holder.The second chapter demonstrates the function of the system of the accommodation paper. The unique structure of the right and obligation among accommodation party, accommodated party and holder makes the negotiable instrument system in the US have the functions of guarantee of bills and hidden guarantee in the law of Geneva. In fact, hidden guarantee is a make up for deficiency of guarantee of bill. It is merely a creation by merchants which has not been confirmed by lawmaking. However, it is a definite choice for the law to ensure a legal position for hidden guarantee, which requires appropriate adjustment of the rules of guarantee of bills and hidden guarantee by introducing accommodation paper system to replace guarantee of bills and hidden guarantee.The third chapter deals with the way and obstacle in the introduction the system of accommodation paper."Negotiable Instruments Law of the People's Republic of China"requires in Article 10 that the draft, acquisition and transfer of a negotiable instrument shall follow the principle of authenticity and creditability and be treated as a real act of trading or debt payment. But there is only creditability between accommodation party and accommodated party without real act of trading or debt payment. Although this doesn't totally overlook the existence of negotiable instrument, it, after all constrains the space of the negotiable instrument. To overcome the obstacle, we should either delete Article 10 or stipulate other exceptional provisions which are up to the different understanding of Article 10.The fourth chapter deals with the new questions which arise when accommodation paper is introduced to China. Introducing negotiable instrument system to China needs not only overcome the obstacle but also realize the connection between the negotiable instrument rule and the prior negotiable instrument stipulations in China. I have analyzed it taking the spiteful counterargument system as an example. Article 13 of"Negotiable Instruments Law of the People's Republic of China"defined the spiteful defense system. Then, is the holder who knows accommodation but still receives or transfers negotiable instrument"spiteful"? The answer is negative. On one hand, acknowledging this defense fails to lead to the realization of the functions of negotiable instrument. On the other hand, the right of defense of accommodation party can not occur from the perspective of analyzing the formation of the spiteful defense. If the holder knows that the bill is accommodation paper and that the accommodated party has violated the contents of the accommodation contract, will the accommodation party proposes spiteful counterargument according to the provisions of Article 13? I believe that it is not tenable, but it is common spite counterargument in the laws of Rome. Therefore, accommodation party can not defense against holders by Article 13.The application of spiteful defense provisions shows that new problems will arise when the accommodation paper is introduced to China. The solutions to the problems will be further studied.