What is Material Alteration of Negotiable Instrument?
A negotiable instrument is a written document that guarantees the payment of a specific amount of money to a designated person or entity. It can be a check, a promissory note, or a bill of exchange. However, when a negotiable instrument undergoes a material alteration, its validity and enforceability can be significantly affected. In this article, we will discuss what constitutes a material alteration of a negotiable instrument and its implications.
Definition of Material Alteration
A material alteration of a negotiable instrument refers to any change made to the instrument that alters its essential characteristics or its obligations. This includes changes to the amount of money to be paid, the payee’s name, the date of payment, or any other essential term that would affect the rights and obligations of the parties involved. It is important to note that a minor alteration, such as a correction of a typographical error, does not constitute a material alteration.
Examples of Material Alteration
To better understand the concept of material alteration, let’s consider some examples:
1. Changing the amount of money to be paid: If a check is originally written for $1,000 but is altered to $10,000, this is a material alteration.
2. Changing the payee’s name: If a check is made out to “John Doe” but is altered to “Jane Smith,” this is also a material alteration.
3. Changing the date of payment: If a check is dated January 1, 2022, but is altered to January 1, 2023, this is a material alteration.
4. Adding a new party to the instrument: If a check is made out to “John Doe” but is altered to “John Doe and Jane Smith,” this is a material alteration.
Consequences of Material Alteration
When a negotiable instrument undergoes a material alteration, the following consequences may arise:
1. The altered instrument becomes void: A material alteration renders the negotiable instrument void, meaning that it no longer has any legal effect.
2. Liability for the alteration: The person who made the alteration is liable for the amount of the instrument, even if they did not intend to defraud anyone.
3. Loss of rights: The original holder of the instrument may lose their rights to enforce the payment, as the altered instrument is no longer valid.
4. Potential legal action: The parties involved may take legal action against the person who made the alteration, seeking damages for any losses incurred.
Preventing Material Alteration
To prevent material alterations from occurring, it is essential to follow these guidelines:
1. Keep the negotiable instrument secure: Store your instruments in a safe place to prevent unauthorized access.
2. Review the instrument carefully: Before signing or accepting a negotiable instrument, ensure that all the information is accurate and complete.
3. Report any alterations: If you discover that a negotiable instrument has been altered, report it to the appropriate authorities immediately.
In conclusion, a material alteration of a negotiable instrument refers to any change that alters its essential characteristics or obligations. It is crucial to understand the consequences of such alterations and take steps to prevent them from occurring. By doing so, you can protect your rights and interests as a party to a negotiable instrument.
