Also known as: altered instrument · alteration of instruments · altered negotiable instrument · material alteration · instrument alteration
Written by attorneys · grounded in primary & secondary sources — see below
An unauthorized change in a negotiable instrument that modifies the obligation of a party or an unauthorized addition of words or numbers to an incomplete instrument. A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value in good faith and without notice may enforce the instrument according to its original terms or according to its terms as completed.
Abigail Alvarez wrote a check to Adrian Aguilar for $500. Aguilar changed the amount to $5,000 and deposited it at his bank. The payor bank paid the check without noticing the change. The bank may enforce its rights against Alvarez only according to the original $500 amount.
C-Wood Lumber deposited checks payable to the company into a fiduciary's personal account. The bank accepted the deposits even though the endorsements raised suspicion of embezzlement. Because the endorsements were authorized, the bank faced liability under fiduciary rules rather than rules governing forged signatures or altered instruments.
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An alteration is an unauthorized change that modifies a party's obligation or an unauthorized addition to an incomplete instrument. Only fraudulent alterations discharge affected parties unless they assent or are precluded from asserting the change.
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A payor bank or drawee that pays a fraudulently altered instrument in good faith without notice may enforce it according to its original terms. The same rule applies to a person taking the instrument for value in good faith without notice of the alteration.
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Comparative fault principles apply to forged signatures or altered instruments. An authorized fiduciary endorsement that deposits a check into a personal account is not treated as a forgery, so liability is governed by fiduciary rules instead.
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…argues that the confirmation reference to the N.G.F.D.A. rules destroys enforceability. If the reference to those rules is a material alteration, the principles noted in our discussion of the option provision are applicable. If the incorporation of the rules was not a material alteration and, hence, under § 4-2-207 a part of the…