Negotiable Instruments Act, Section 88

Negotiable Instruments Act, Section 88: Acceptor or Indorser Bound Notwithstanding Previous Alteration

Section 88 of the Negotiable Instruments Act, 1881 provides that an acceptor or indorser remains bound by his acceptance or indorsement even where the instrument had been previously altered.

The section is based on the principle that a person who knowingly accepts or indorses an altered instrument adopts it in its altered form and becomes liable accordingly.

1. General Principle of the Section

Ordinarily, under Section 87 of the Act, a material alteration made without consent renders the negotiable instrument void against parties who did not agree to such alteration.

However, Section 88 provides that an acceptor or indorser who subsequently accepts or indorses the altered instrument remains bound by it and cannot later avoid liability on the ground of prior alteration.

2. Applicability of the Provision

This section applies to acceptors of bills of exchange and indorsers of negotiable instruments where an alteration has already been made in the instrument.

It operates when the acceptor or indorser subsequently signs or undertakes liability upon the instrument in its altered form.

3. Meaning of Acceptor

An acceptor is the drawee of a bill of exchange who undertakes primary liability by accepting the bill, and under Section 88, an acceptor who accepts an altered instrument becomes bound according to its altered tenor.

4. Meaning of Indorser

An indorser is a person who transfers a negotiable instrument by signing and delivering it to another person, and where such indorsement is made after alteration of the instrument, the indorser remains bound despite the earlier alteration.

5. Effect of Previous Alteration

The section refers to a “previous alteration,” meaning an alteration existing before the acceptance or indorsement, and the law treats a subsequent signature as adoption of the instrument in its altered form.

6. Reason for the Rule

Section 88 is based on the principle of consent and voluntary assumption of liability, under which a person who accepts or indorses an altered instrument is presumed to have accepted it in its altered state and cannot later deny liability on that ground.

7. Principle of Adoption of Altered Instrument

The section is based on the doctrine that acceptance or indorsement after alteration amounts to adoption of the altered instrument, since by signing it in its altered form the party signifies willingness to be bound according to its existing tenor.

8. Protection of Commercial Transactions

This rule promotes commercial certainty by ensuring that subsequent acceptors or indorsers cannot avoid liability merely because of a prior alteration, thereby preserving confidence and reliability in negotiable instruments.

9. Scope of Liability

The liability of the acceptor or indorser under this section arises from his own acceptance or indorsement after alteration, and the section does not revive the liability of earlier parties discharged under Section 87.

10. Requirement of Voluntary Acceptance or Indorsement

The provision provides that a party who voluntarily accepts or indorses an altered instrument remains bound, subject to defenses such as fraud or coercion in appropriate cases.