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Understanding Material Alteration in Cheques

A material alteration to a negotiable instrument voids the instrument and affects the obligations of the parties. It occurs when any essential term is altered, such as the date, amount, interest rate, or parties. Examples include changing the due date or amount, tearing part of the instrument, or adding a new party. While banks are protected if they pay a materially altered cheque due to indications of suspicion, they should still make inquiries in such cases. A crossed cheque directs payment through banks rather than over the counter.

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5K views8 pages

Understanding Material Alteration in Cheques

A material alteration to a negotiable instrument voids the instrument and affects the obligations of the parties. It occurs when any essential term is altered, such as the date, amount, interest rate, or parties. Examples include changing the due date or amount, tearing part of the instrument, or adding a new party. While banks are protected if they pay a materially altered cheque due to indications of suspicion, they should still make inquiries in such cases. A crossed cheque directs payment through banks rather than over the counter.

Uploaded by

Simran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
  • Law of Contracts
  • Material Alterations
  • What Constitutes Material Alteration?
  • Instances of Material Alteration
  • Legal Consequences
  • Liability on Banks
  • Crossed Cheque
  • Description of Liabilities

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

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 i
What Constitutes Material Alteration ? The negotiable instrument act of 1881 , is silent on the subject as to what constit
Instances of Material Alteration  Alteration of the date of the instrument.  Alteration of the due amount payable.  Altera
Legal Consequences Section 87- It renders as void as against anyone who is party thereto at the time of making such alter
Liability on Banks Banker is protected , even though he has paid a materially altered cheque. If anything arouses his sus
Crossed Cheque It is a cheque which cannot be presented to the banker or the counter. Section 6 of the Negotiable Instrume
Description of Liabilities Paying Banker on the crossed cheque , Section 126 – the compensation rested holds to be neithe

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