Instances of material alteration

The following alterations are materials alterations which will make the instrument void:

1) Altering the date of the instrument.
2) Altering the amount payable on the instrument;
3) Altering time or place of payment;
4) Addition of place of payment without acceptor’s assent.

Whether alteration is material or not, ultimately it is a question of fact in each case.

Alterations permitted are:

i) completing an inchoate instruments.
ii) Converting blank indorsements into indorsements in full;
iii) Crossing of cheques;
iv) Qualified acceptance
v) Alteration made with consent of the parties;
vi) Alteration made to carry out common intention of all the original parties; for example date of instruments is altered with the consent of parties.
vii) Alteration of any note on the margin of the instruments.
viii) Alteration though material if made before the issue of the instrument.
ix) Alteration made for purpose of correcting mistake.

As the alteration affects the liabilities of parties previous to alteration an acceptor or indorser of a negotiable instrument being subsequent party is bound by his acceptance or indorsement notwithstanding any previous alteration of the instrument.

Payment of instrument where alteration is not apparent. Alterations should be apparent on the face of the instrument. Instances may arise where the instrument is materially altered but alteration is not apparent. Thus:

i) where the instrument does not appear to have been materially altered;
ii) Where the cheque does not appear to have been crossed or to have a crossing which has been obliterated the person or banker liable to pay, makes the payment in due course, the parties are discharged from liability. Such payment shall not be questioned by reason of the instrument having been altered or the cheque crossed. Acceptor is liable only for the original tenor of the instrument and not for its altered tenor. Material alteration is makes the instrument void, though the original debt is not extinguish. However, if any such alteration is made by the indorsee, indorser is discharged form liability to him, even in respect of the original considerations.

Where the cheque is an electronic image:

Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor of such electronic iamge and the truncated cheque shall be a material alteration and it shall be the duty of the bank or clearing house, as the case may be, to ensure the exactness of the apparent tenor of electronic image of the truncated cheque while truncating and transmitting the image.

Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque shall verify from the party who transmitted the image to it, that the images so transmitted to it and received by it, is exactly the same.

By holder destroying indorser’s remedy:

Where the holder of a negotiable instrument without consent of the indorser destroys or impairs the indorser’s remedy against a prior party, the indorser is discharged from liability to the holder to the same extent as if the same extent as if the instrument had been paid at maturity

Draft indorsed by payee: Where any draft that is, an order to pay money , drawn by one office of a bank on another office of the same bank for a sum of money payable to order or on demand , purports to be endorsed by or on behalf of the payee the bank is discharged by payment in due course. Drafts are drawn by one branch of a bank upon another branch. The account of the customer is debited and the amount s transferred to another branch of bank which the draft is drawn. When payment is made by the branch office of the bank upon which it is drawn, to the payee or to the person endorsed by the payee, the bank is discharged.

By operations of law: Parties to the instrument are also discharged by operation of law under the following circumstances:

i) By an order of the insolvency Court discharging the insolvent.
ii) When debt under the bill is merged into the judgment debt.
iii) By remedy becoming time barred.