Ark. Code Ann. § 4-3-407 (2026)
Alteration
- “Alteration” means (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.
- Except as provided in subsection (c), an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
- A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and 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.
History. Acts 1991, No. 572, § 5.
Case Notes
Interest Rate.
Alteration of interest rate was material, but not fraudulent. In re Sanders, 75 B.R. 757 (Bankr. W.D. Ark. 1987) (decision under prior law).
Remedy.
Although bank attached a “limiting memorandum” to note, the drastic remedy of discharge of debtors' entire obligation was not appropriate where limiting memorandum reflected the final loan as it was actually approved, and defendant knew of this limitation and continued to operate under it. In re Slefco, 107 B.R. 628 (Bankr. E.D. Ark. 1989) (decision under prior law).
Validity Between Parties.
Where the changes made in a promissory note were the result of the borrowers' request for credit life insurance and were effected with their assent, and the subsequent correction in the amount of the monthly payments was merely for the purpose of conforming the payments to the actual agreement of the parties, the various errors, discrepancies and corrections rendered the note non-negotiable, but did not affect the validity of the note between the parties, even though none of the errors were directly attributable to the borrowers. Winkle v. Grand Nat'l Bank, 267 Ark. 123, 601 S.W.2d 559, cert. denied, 449 U.S. 880, 101 S. Ct. 230, 66 L. Ed. 2d 104 (1980) (decision under prior law).
Trial court properly determined that a decedent's companion did not convert the decedent's funds when she deposited a check into her account, as the decedent's estate failed to show that the check, which was an incomplete instrument under § 4-3-115(a) and (d), was completed without authority; as the change was deemed authorized, the check was not an altered instrument under subsection (a) of this section. Hankins v. Austin, 2012 Ark. App. 641, 425 S.W.3d 8 (2012).