I. DEFINITION OF ALTERATION
The term “alteration” is defined in U.C.C. § 3-407(a) to mean: (i) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or (ii) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
II. EFFECT OF ALTERATION ON DRAWEE
Except as provided in Paragraph III. below, an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party asserts or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
III. EFFECT OF ALTERATION ON PAYOR OR DRAWEE BANK
A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith without notice of the alteration, may enforce rights with respect to the instrument (i) according to its original terms, or (ii) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed (See, U.C.C. § 3-407).
If customer’s failure to exercise ordinary care substantially contributed to the alteration, it is possible for the check to be properly payable in the altered amount. For example, this may occur when spaces were left in the body of the check in which words or figures may be inserted (See, U.C.C. § 3-406).
A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to: the original terms of the altered item; or the terms of the completed item, even though the bank knows the item has been completed, unless the bank has notice that the completion was improper (See, U.C.C. § 4-401).