What is Material alteration?
The term ‘material alteration‘ indicates alteration or change in the material parts of the instrument. It may be defined as any change, which alters the very nature of the instrument. Thus, it is the alteration, which changes and destroys the legal identity of the original instrument and causes it to speak a different language in legal effect from that which it originally spoke.
A material alteration makes the instrument void, i.e., inoperative and affects the rights and obligations of the parties to the instrument. It, however, does not affect one who becomes a party to an instrument subsequent to its material alteration, if any.
What constitutes a Material Alteration?
Every alteration or change on a negotiable instrument cannot be established as material alteration and would not necessarily vitiate the instrument or affect the rights and obligations of the parties thereto.
The Negotiable Instruments Act is silent on the subject as to what constitutes a material alteration. Courts of Law in India in this regard have followed the English Common Law, which held that anything, which has the effect of altering the legal relations between the parties, the character of the instrument, or the sum payable, amounts to a material alteration.
Accordingly, an alteration can be termed as material alteration if it is such that it alters or attempts to alter the character of the instrument and affects or attempts to affect the contract, which the instrument contains. It may arise not only by means of altering, changing, or erasing a certain thing already written on the instrument, but also by a new insertion.
Instances of Material Alteration
The following are considered as material alteration.
1. Alteration of the date of the instrument
2. Alteration of the amount payable
3. Alteration in time of payment
4. Alteration of the place of payment
5. Alteration of rate of interest or any change of party thereto, if any
6. Tearing of the material part of the instrument
7. Where a bill is accepted generally, the insertion of a place of payment
8. Addition of a new party to the instrument
9. Addition of words to a bill of exchange endorsed in blank so as to convert the same into special endorsement.