CO Code § 4-3-407 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 3 - Negotiable Instruments|Part 4 - Liability of Parties|§ 4-3-407. 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) of this section, 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. Source: L. 94: Entire article R&RE, p. 865, § 1, effective January 1, 1995.    Editor's note:   This section is similar to former § 4-3-407 as it existed prior to 1994.   OFFICIAL COMMENT   1. This provision restates former Section 3-407. Former Section 3-407 defined a “material” alteration as any alteration that changes the contract of the parties in any respect. Revised Section 3-407 refers to such a change as an alteration. As under subsection (2) of former Section 3-407, discharge because of alteration occurs only in the case of an alteration fraudulently made. There is no discharge if a blank is filled in the honest belief that it is authorized or if a change is made with a benevolent motive such as a desire to give the obligor the benefit of a lower interest rate. Changes favorable to the obligor are unlikely to be made with any fraudulent intent, but if such an intent is found the alteration may operate as a discharge.   Discharge is a personal defense of the party whose obligation is modified and anyone whose obligation is not affected is not discharged. But if an alteration discharges a party there is also discharge of any party having a right of recourse against the discharged party because the obligation of the party with the right of recourse is affected by the alteration. Assent to the alteration given before or after it is made will prevent the party from asserting the discharge. The phrase “or is precluded from asserting the alteration” in subsection (b) recognizes the possibility of an estoppel or other ground barring the defense which does not rest on assent.   2. Under subsection (c) a person paying a fraudulently altered instrument or taking it for value, in good faith and without notice of the alteration, is not affected by a discharge under subsection (b). The person paying or taking the instrument may assert rights with respect to the instrument according to its original terms or, in the case of an incomplete instrument that is altered by unauthorized completion, according to its terms as completed. If blanks are filled or an incomplete instrument is otherwise completed, subsection (c) places the loss upon the party who left the instrument incomplete by permitting enforcement in its completed form. This result is intended even though the instrument was stolen from the issuer and completed after the theft.   ANNOTATION   Annotator's note. The following annotations include cases decided under former provisions similar to this section.   Alteration of a promissory note renders it invalid. Farmers State Bank v. Klein, 159 Colo. 165 , 410 P.2d 632.   Where a promissory note, blank as to the rate of interest and the time from which interest is to be computed, is subscribed by the maker, as well as the sureties, and delivered by the maker to the payee, who, without authority of the sureties, fills the blanks and advances money thereon to the maker, the alteration is a material one, and, consequently, the instrument is thereby avoided. Ayres v. Walker, 54 Colo. 571 , 131 P. 384 (1913).   Reason for rule. This is an old and wise provision of the law, and the reason for it is apparent when we consider the absoluteness of custody and control by the payee or holder and the utter helplessness to prevent an alteration in the case of the maker in that respect. And so the law has provided as a penalty, not only of criminal liability, but a forfeiture and cancellation of the obligation in its entirety. Ayres v. Walker, 54 Colo. 571 , 131 P. 384 (1913).   One is estopped as against a H.D.C. One who signs a promissory note with blank spaces for interest which are subsequently filled in by the payee and thereafter assigned to a holder in due course without knowledge thereof is estopped to defend on the ground of alteration. Statton v. Stone, 15 Colo. App. 237, 61 P. 481 (1900).   An alteration on the face of a note reducing the principal, but made honestly with the intention of making a proper credit, does not bar recovery on the note. Whitehead v. Emmerich, 38 Colo. 13 , 87 P. 790 (1906).   The contention of claimant that the burden of explaining an alteration of the date of a note upon which his claim was based was not upon him since the defendant had not objected on that ground was overruled. Gavin v. Kniffen, 82 Colo. 448 , 261 P. 6 (1927).   Defense of alteration must be based on preponderance of evidence. Where the defense of fraudulent alteration is interposed in an action on a promissory note, an instruction that the jury can find for the defendant only upon a clear satisfactory preponderance of the evidence is sufficient. Brunton v. Ditto, 51 Colo. 178 , 117 P. 156 (1911).