Law of Contracts

Material Alteration
Submitted by – Tuba Aftab
Material Alterations

 It indicates alteration or change in the material parts of the

instruments .

 It destroys the legal identity of the original instrument .

 A material alteration makes the instrument void that is in

operative and affects the right of obligations of parties to
the contract .
 What Constitutes Material
Alteration ?
The negotiable instrument act of 1881 , is silent
on the subject as to what constitutes a material
alterations.

Courts of Law in India in this regards have

followed the English Common Law , which held
that anything , which has the effect of altering
the legal alteration between the parties , or the
sum payable , amounts to material alteration
 Instances of Material Alteration

 Alteration of the date of the instrument.

 Alteration of the due amount payable.

 Alteration in the time of payment .

 Alteration of the place of payment .

 Alteration of rate of interest .

 Tearing of the material part .

 Addition of the new party to the instrument .

 Addition of words to a bill of exchange , endorsed in blank.

 Where a bill is excepted generally , the insertion of the place of payment.

 Legal Consequences

 Section 87- It renders as void as against anyone

who is party thereto at the time of making such
alteration.

 Section 88 – Acceptor and Endorser bound

notwithstanding previous alteration.
 Liability on Banks
 Banker is protected , even though he has paid a
materially altered cheque.

 If anything arouses his suspicion , he should

make enquiries for the same

 Mere indication is not suspicio.

 Banker’s obligation to pay cheque arises out of

contract .
 Crossed Cheque

It is a cheque which cannot be presented to the banker

or the counter. Section 6 of the Negotiable
Instrument Act , 1881 defines cheque as “ a bill of
exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand “.

A crossing of cheque may be understood to be a

direction to the drawee banker not to pay the money
over the bank’s counter but through the banks
 Description of Liabilities

 Paying Banker on the crossed cheque ,

Section 126 – the compensation rested holds to
be neither high nor excessive .

 Liability of a drawer – If the banker has paid

the amount over the counter , is not entitled to
debit the account of the customer with the
amount of the cheque and is not considered to
be a payment made in due course