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MATERIAL ALTERATION
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NEGOTIABLE INSTRUMENT
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BUSINESS LAW
MATERIAL ALTERATION ( SECTION 87)
1. SECTION 87
INCORPORATES THE PRINCIPLES AND IS DESIGNED TO PREVENT FRAUD AND DETER MEN FROM
TEMPERING WITH THE WRITTEN INSTRUMENT.
2. IT IS NOT
EVERY ALTERATION THAT AVOIDS THE INSTRUMENT,TO AVOID THE INSTRUMENT THE
ALTERATION MUST BE A MATERIAL ONE
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AN ALTERATION IS MATERIAL WHICH:_
1. ALTERS THE
CHARACTER OR IDENTITY OF THE INSTRUMENT OR WHICH SHAKES THE FOUNDATION OF THE
INSTRUMENT
2. CHANGES THE
RIGHTS AND LIABILITIES OF THE PARTIES OR ANY OF THE PARTIES TO THE INSTRUMENT
OR
3. ALTERS THE
OPERATION OF THE INSTRUMENT
MATERIAL ALTERATION ( SECTION 87)
INSTANCES OF MATERIAL ALTERATION:-
- ALTERATION OF
DATE
- ALTERATION OF
NAME
- ALTERATION OF
TIME
- ALTERATION OF
PLACE OF PAYMENT
- ALTERATION OF
RATE OF INTEREST
- ALTERATION BY
ADDITION OF NEW PARTY
- TEARING AN
INSTRUMENT IN PART
- ALTERATION IN
SIGNATURE OF THE DRAWER OR THE ORIGINAL PAYEE
- ALTERATION OF
AN ORDER CHEQUE TO BEARER EXCEPT BY OR WITH THE CONSENT OF THE DRAWER
- AFFIXING OF
STAMPS WITHOUT THE PROMISOR’S KNOWLEDGE TO NOTE WHICH WAS EXECUTED ON AN
UNSTAMPED PAPER
- WHERE THE
CHEQUE IS AN ELECTRONIC IMAGE OF TURNCATED CHEQUE,ANY DIFFERENCE IN
APPARENT TENOR OF SUCH AN ELECTRONIC IMAGE AND TRUNCATED CHEQUE SHALL BE
MATERIAL ALTERATION
INSTANCES WHERE ALTERATION IS NOT MATERIAL ALTERATION
1. ALTERATION
MADE TO CARRY OUT THE ORIGINAL INTENTION OF THE PARTIES E.G THE SUBSEQUENT
INSERTION OF THE WORD OR ORDER WHERE THE DRAWER OF A BILL FORGETS TO USE THESE
WORDS
2. CORRECTION OF
MISTAKE OF DATA OR OF CLERICAL ERROR
3. ALTERATION
MADE WITH THE CONSENT OF THE PARTIES
4. ALTERATION
MADE BEFORE THE INSTRUMENT IS ISSUED
5. ALTERATION
WHICH IS NOT APPARENT AND INSTRUMENT GOES INTO THE HAND OF THE HOLDER
6. THE ADDITION
OF WORD WHICH COULD NOT PREJUDICE ANY ONE
ALTERATION AUTHORISED BY THE ACT
1. FILLING
BLANKS INCHOATE INSTRUMENT
2. CONVERSION OF
BLANK ENDORSEMENT INTO FULL ( SEC 49)
3. MAKING
ACCEPTANCE CONDITIONAL ( SECTION 86)
4. CROSSING OF
UNCROSSED CHEQUE .CONVERSION OF GENERAL CROSSING TO SPECIAL CROSSING,ADDITION OF
WORDS LIKE NOT NEGOTIABLE TO CROSSED CHEQUE
EFFECT OF MATERIAL ALTERATION
1. TO DISCHARGE
PARTIES WHO BECOME PARTIES THERETO PRIOR TO THE ALTERATION AND THE INSTRUMENT
RENDERED VOID
2. BUT IF AN
ALTERATION IS MADE IN ORDER TO CARRY OUT THE COMMON INTENTION OF THE ORIGINAL
PARTIES,IT DOES NOT RENDER THE INSTRUMENT VOID
3. THE PERSON
WHO MADE THE ALTERATION AND ALL SUBSEQUENT ENDORSERS ARE BOUND BY THE BILL AS
4. ANY MATERIAL
ALTERATION IF MADE BY THE ENDORSE ,DISCHARGES HIS ENDORSER FROM LIABILITY TO
HIM IN RESPECT OF CONSIDERATION
•
THE SECTION 87 IS BASED ON SOUND POLICY AND MAY
BE DEFENDED ON TWO GROUNDS:-
1. THAT NO MAN
SHOULD BE PERMITTED TO TAK THE CHANCE OF COMMITTING A FRAUD WITHOUT RUNNING ANY
RISK OF LOSS BY THE EVENT WHEN IT IS DETECTED
2. THAT BY
ALTERATION OF THE IDENTITY OF THE INSTRUMENT IS DESTROYED AND TO HOLD ONE OF
THE PARTIES LIABLE UNDER SUCH CIRCUMSTANCES WOULD BE TO MAKE LIABLE FOR
SOMETHING WHICH HE NEVER AGREED
EXAMPLE
THE HOLDER OF THE BILL OF EXCHANGE ALTERS THE DATE OF THE INSTRUMENT TO
ACCELERATE OR PREPONE THE TIME OF PAYMENT
ANSWER:- YES
THERE IS MATERIAL ALTERATION BECAUSE ALTERATION IN THE DATE AND TIME OF PAYMENT
IS TREATED AS MATERIAL ALTERATION.
THE DRAWER OF THE BILL FORGETS TO WRITE THE WORDS “ OR ORDER “ ON THE BILL
SUBSEQUENTLY THE HOLDER OF THE BILL OF
EXCHANGE INSERTS THESE WORDS ON THE BILL.
ANSWER:-NO
THERE IS NO MATERIAL ALTERATION
RAM IN POSSESSION OF INCHOATE INSTRUMENT WHERE HE THE AMOUNT HAS NOT BEEN
WRITTTEN WRITES HIMSELF.
ANSWER:UNDER
SECTION 20 OF THE ACT,A HOLDER IS AUTHORISED TO FILL IN THE BLANKS OF AN
INCHOATE INSTRUMENT
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