Material alteration

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Material alternation is "an alternation which alters the busieness effect of the instrument if used for any busienss purpose. Any change made in the instrument that couses it to speak a different language from what is originally intended, or which changes the legal indetity of the instrument in its terms or in relation of parties thereto is a material alternation." (S.S. Gulshan 2009, p. 305)

According to M.C. Kuchhal and V. Kuchhal if material alteration is done by mutual consent, the original contract is discharged by alternation and the new one is altered form and takes the original's place. A material alteration is one which change the legal effect of the agreement e.g. a modification in amount of money of payment or a change in a rate of interest. What is important, a material alterantion made in written form by one party without the permission of the other, willl make the whole agreement void and nobody can maintain an action upon it. It comes under dischared of a contract by operation of law (2014, p. 56).

Financial aspect

A material alternation makes a significant change in the mandate given in the cheque. If the addition, deletion or alternation does not affect the drawer's mandate or the legal position of the sides materially or significantlly it can not be called a material alternation (M. Sukhvinder 2012, p. 580). Following alternations can not be treated as a material ones (M. Sukhvinder 2012, p. 580):

  • crossing out an open cheque by holder,
  • conversation of an endrosement in blank into fully endorsement,
  • converstion of a general crossing into a special crossing,
  • conversation of bearer to order,
  • an alternation made with the consent of all sides,
  • alternation made to cary out the mutual intention of the original parties,
  • completing an undeveloped instrument,
  • addition or words which are not negotiable to a crossed cheque

Effect of material alternation

"Material alternation of negotiable instrument discharges all parties who are liable on the instrument at the time of the alternation and who do not consent to such alternation. However an alternation does not in any way affect the liability of person becoming parties subsequent to the alternation." (G. Mehta 2010, 666-667) An alternation can be called material only if it is affected by the will of the person by whom or under whose direction it is made. That is why the alternation wchich is the result of an accident does not render the document void (M. Sukhvinder 2012, p. 580).

Examples

The examples of material alternations are (M.C. Kuchhal, V. Kuchhal 2014, p. 214):

  • any alternation of the date, sum, time or place of payment,
  • alternation consisting in addition of a new parties to the instrument,
  • alternation of the rate of interest,
  • breaking off the material part of the instrumnet

Advantages of Material alteration

Material alteration has a number of advantages. Firstly, it can help to protect the interests of both parties in a transaction by making sure that the terms are understood and agreed upon. Secondly, it can help to ensure that any changes that are made to the instrument do not create any legal implications that were not originally intended. Thirdly, it can help to make sure that the instrument is valid in the eyes of the law. Lastly, it can help to make sure that the instrument is enforceable if either party tries to breach the terms. All of these advantages help to ensure the security and validity of the instrument.

Limitations of Material alteration

Material alteration has several limitations that must be taken into consideration when using the concept. These limitations include:

  • Making changes to the instrument without the consent of all parties involved - Material alternations can only be made with the agreement of all parties involved in the instrument. Any alternations made without the consent of all parties could be considered invalid and have no legal effect.
  • Making changes that contradict the original purpose of the instrument - Any changes made to the instrument that contradict the original purpose of the instrument could be considered invalid. This could include changes to the language, terms, or legal identity of the instrument.
  • Making changes that are not allowed by the governing law - Each jurisdiction has its own set of laws that dictate what kinds of changes are allowed to be made to an instrument. Any changes made to an instrument that are not allowed by the governing law could be considered invalid.
  • Making changes that are not easily understood - Any changes made to an instrument should be clear and easily understandable by all parties involved. If the changes are not easily understood, they may not be legally binding.
  • Making changes that are too broad - Material alternation should be used to make specific changes to the instrument. Making changes that are too broad could be considered invalid.

Other approaches related to Material alteration

Material alternative is an important concept in banking and financial instruments, as it changes the legal identity of the instrument and its terms. Other approaches to material alteration include:

  • Physical alteration: This is when a physical change is made to the instrument, such as erasing or adding words, which changes the legal identity of the instrument.
  • Indorsement: This is when a party adds their name, address, or other identifying information to the instrument, which changes the legal identity of the instrument.
  • Signature alteration: This is when a party changes their signature on the instrument, which changes the legal identity of the instrument.
  • Alteration of terms: This is when the terms of the instrument are changed, which changes the legal identity of the instrument.

In conclusion, material alternation is an important concept in banking and financial instruments, as it changes the legal identity of the instrument and its terms. Other approaches to material alteration include physical alteration, indorsement, signature alteration, and alteration of terms.


Material alteration — recommended articles
Contractual relationship — Commissioner for oaths — Inchoate instrument — Binding contract — Mutual agreement — Assignment of claims — Assignment clause — Executory consideration — Deed of surrender

References

Author: Dominika Kuraś

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