Some jurisdictions allow contract law to take precedence over legal tender, allowing merchants to indicate, for example, that they do not accept cash payments. [2] Coins and banknotes are generally defined as legal tender in many countries, but personal cheques, credit cards and similar cashless payment methods are not. Some jurisdictions may include a particular foreign currency as legal tender, sometimes as exclusive legal tender, or at the same time as their local currency. Some jurisdictions may prohibit or restrict payments from non-legal tender. [ref. needed] In some jurisdictions, legal tender may be rejected as payment if there is no debt before the time of payment (the obligation to pay may arise at the same time as the offer to pay). For example, vending machines and transport personnel are not required to accept the highest face value of the ticket. Merchants can refuse large banknotes, which falls under the legal concept of invitation to treatment. [clarification needed] Federal Reserve notes and circulation coins are the two most commonly used legal tender currencies 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. 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] The term “legal tender” comes from the Middle French tendre (verbal form), which means “to offer”. The Latin root is tender (stretching), and the meaning of tender as an offer is related to the etymology of the English word “extend” (hold outwards). [5] In 1847, the Colonial Bank of Issue became the sole issuer of legal tender. In 1856, however, the Colonial Bank of Issue was dissolved; and the Paper Currency Act of 1856 reconfirmed the legal tender of the Union Bank. The law also allowed the Eastern Bank to issue legal tender, but this bank ceased operations in 1861. Legal tender in any country is the generally accepted currency in all its denominations, which is used to settle economic transactions on the open market.
The forms in which this offer is submitted and accepted may vary depending on the laws of each country, but the concept is essentially the same everywhere. In many cases, the legal system, as part of its due process, imposes an obligation on a party to perform a previously agreed financial obligation. Gold and silver coins are not legal tender in the United States, but some states have lobbied for that to change. Precious metals can be exchanged for legal tender in some pawnshops and elsewhere, but are not legal tender per se. Cryptocurrency is gaining popularity and many are calling for certain types, such as Bitcoin, to be legal tender. Some countries are even taking steps to convert their national currency into cryptocurrency, such as Venezuela`s Petro. Note that the US dollar is the country`s only legal tender. Non-US currencies and various cryptocurrencies are sometimes accepted, but business owners should convert these currencies into dollars to pay taxes and transfer the proceeds of a sale to a bank account. The sixth series of Swiss banknotes from 1976, recalled by the SNB in 2000, is no longer legal tender, but can be exchanged for regular banknotes until April 2020. In the People`s Republic of China, the official renminbi currency is unlimited legal tender for all transactions. The law requires that a public entity or individual cannot refuse to use money to settle a public or private domestic debt. [23] You may have heard someone in a store say, “But it`s legal tender!” Most people think that this means that the store has to accept the payment form.
But this is not the case. Legal tender is used exclusively for the secured settlement of debts and does not affect a party`s right to refuse delivery in a transaction. [38] Legal tender has a narrow technical meaning that is of no use in everyday life.