Legal tender was first introduced for gold and silver coins in the French Penal Code of 1807 (Art. 475, 11°). In 1870, legal tender was extended to all banknotes of the Bank of France. Anyone who objects to such coins because of their total value would be prosecuted (French Penal Code, art. R. 642-3). Banknotes and coins may be withdrawn from circulation, but remain legal tender. U.S. bank notes issued at any given time are legal tender even after they have been withdrawn from circulation. Canadian $1 and $2 notes are legal tender even if they have been withdrawn and replaced by coins, but Canadian $1,000 notes are legal tender even if withdrawn from circulation in a bank.
However, banknotes withdrawn from circulation are usually no longer legal tender, but can be exchanged for common currency at the Bank of England itself or by post. All issues of New Zealand paper and polymer banknotes issued from 1967 onwards (and $1 and $2 notes until 1993) remain legal tender; However, the 1, 2 and 5 cent coins are no longer used in New Zealand. The Decimal Currency Act 1970 regulated legal tender prior to the introduction of the euro and contained provisions similar to those laid down in UK law (all taken from earlier UK legislation), namely: coins over 10 pence were legal tender for payments not exceeding £10, coins of up to 10 pence were legal tender for payments not exceeding £5, and the bronze coins were legal tender for a payment not exceeding 20 pence. Legal tender is a form of money that courts must recognize as a satisfactory payment for monetary debts. [1] Each jurisdiction determines what is legal tender, but it is essentially anything that extinguishes the debt when it is offered („offered“) to pay a debt. The creditor is not obliged to accept the payment offered, but the act of offering payment in legal tender releases the debt. Between 1861 and 1874, a number of other banks, including the Bank of New Zealand, the Bank of New South Wales, the National Bank of New Zealand and the Colonial Bank of New Zealand, were incorporated by Parliament and authorized to issue gold-backed banknotes, but these notes were not legal tender. Under U.S. federal law, U.S. dollar cash is a valid and legal offer to pay past debts when offered to a creditor. In contrast, federal law does not require a vendor to accept federal currency or coins as payment for goods or services exchanged at the same time.
Therefore, private companies can formulate their own policies on whether or not to accept cash, unless state law provides otherwise. [3] [4] In the United States, the recognized legal tender consists of Federal Reserve notes and coins. Creditors are required to accept it as an offer of payment to settle a debt; However, unless prohibited by state law, private companies may refuse to accept some or all forms of cash offers unless a transaction has already taken place and the customer has not been at fault. With the Supreme Court`s 1884 decision in Juilliard v. Greenman, the Supreme Court ruled that Congress had the right to issue legal tender banknotes for the payment of public and private debts. Treasury bills or banknotes are legal tender which, in the eyes of the law, must be accepted when paying debts. [45] The decision in Legal Tender (to which Juilliard v. Greenman belongs) prompted subsequent courts to „support the federal government`s invalidation of gold clauses in private contracts in the 1930s.“ [46] The Bank Note Issue Act of 1893 allowed the government to declare a bank`s right to issue legal tender. This allowed the government to make such a statement in support of the Bank of New Zealand when the bank ran into financial difficulties in 1895 that could have led to its collapse. Some currencies, such as the US dollar and the euro, are used as legal tender in countries that do not issue their own currency or have found the stable dollar preferable to their own currency.
For example, Ecuador adopted the U.S. dollar as its legal tender in 2000 after Ecuador`s currency, sugar, rapidly devalued, making $1 worth $25,000. The adoption of the U.S. dollar as the primary legal tender is colloquially referred to as „dollarization,“ although the practice is commonly referred to as currency substitution. This note is legal tender (literal translation, money in payment of the debt) according to the law. Legal tender refers to all U.S. coins and currencies issued by the government. U.S.
cash dollars are also valid forms of legal tender. Nevertheless, federal laws do not require a seller to accept cash as legal tender for payment for goods or services that have been provided. This allows companies to establish their own policies on accepting cash as legal tender. Legal tender also includes Federal Reserve notes as well as bank notes from Federal Reserve banks and national banking associations for the purpose of settling public and private debts, duties, fees and taxes. Legal tender generally does not include personal checks, credit cards or other general forms of non-cash payments. In some cases, foreign currency may be accepted as legal tender. In addition, legal tender can only be used in connection with the repayment of debts. Banknotes are not legal tender in Scotland. [42] Scottish banknotes are legal tender but are not legal tender anywhere in the United Kingdom. [43] Demonetization is currently prohibited in the United States, and the Coinage Act of 1965 applies to all U.S.
coins and currencies, regardless of age. The closest historical equivalent in the United States, outside of Confederate silver, was from 1933 to 1974, when the government banned most private property of gold bullion, including gold coins held for non-numismatic purposes. Now, however, even surviving pre-1933 gold coins are legal tender under the 1964 law. Federal Reserve notes and circulation coins are the two most commonly used legal tenders in the United States. The Federal Reserve Act of 1913 replaced all other fiat currencies with Federal Reserve banknotes. They are made of linen and cotton, so their real value is much lower than their monetary value. This is ideal for legal tender. You never want the intrinsic value of the offer to be greater than the value assigned. Sometimes countries accept the legal tender of another country if they are close to the border or have close trade relations. Shops and restaurants near the Canada-U.S. border accept U.S. and Canadian dollars to make it easier for tourists.
Some countries around the world actually took the U.S. dollar as their own legal tender rather than their currency because they felt the dollar was more stable in value. This practice is called dollarization or currency substitution. The popularity of cross-border and online shopping is increasing the demand for more forms of money, such as popular cryptocurrency alternatives such as Bitcoin, which are recognized as legal tender. However, given the official objections to such alternatives, except in a few minor cases, they may still be a few years away and are not legal tender in the United States or most other countries. There are many online services that accept cryptocurrencies, and this practice is completely legal. Due to their status as unofficial competitors with legal tender, cryptocurrencies are mainly limited to use in gray and black market activities or as speculative investments. Before the Civil War (1861 to 1865), silver coins were legal tender only up to a maximum of US$5. Before 1853, when American silver coins were weighed by 7%, the coins had exactly their value in metal (from 1830 to 1852).
Two 50-cent silver coins had silver with an exact value of $1. An 1849 gold U.S. dollar had $1 worth of gold. With the influx of gold from California mines in the early 1850s, the price of silver rose (gold fell). For example, from 1840 to 1852, 50-cent coins were worth 53 cents when melted. The government could increase the value of (expensive) gold coins or reduce the size of all U.S. silver coins. With the reduction of 1853, a 50-cent coin had only 48 cents of silver. This is the reason for the $5 silver coin limit as legal tender; Paying someone $100 in the new silver coins would give them $96 in silver. Most people preferred bank checks or gold coins for large purchases.
The New Taiwan Dollar issued by the Central Bank of the Republic of China (Taiwan) is legal tender for all payments made in the territory of the Republic of China, Taiwan. [33] However, since 2007,[34] candidates for election officials in the Republic of China are no longer allowed to file a deposit. [35] The history of banknotes in New Zealand was much more complex.