Money Is a Legal Tender When It Is
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). 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. The Swiss franc is the only legal tender in Switzerland. Any payment of up to 100 Swiss coins is legal tender; Banknotes are legal tender for any amount.
[32] In general, legal tender can take two fundamental forms. A government can simply ratify a market-based commodity money like gold as legal tender and agree to accept the payment of taxes and execute contracts denominated in that commodity. Alternatively, a government may declare a counterfeit commodity or a worthless token as legal tender, which then adopts the characteristics of a fiat currency. Prior to the 1965 Act, the Currency Act of 1873 was still in force. This archaic law accepted silver coins minted as federal currency. Coins could no longer be minted in silver once the value of silver increased, because the actual value of the coins became greater than their assigned value. The importance of legal tender law lies in the fact that the government protects the value of your money. If you offer a creditor $1,000 in payment of a debt, they must accept it, regardless of their opinion of you personally or other problems the creditor is facing. Banknotes and coins are considered legal tender, while stamps are not considered legal tender. Many countries consider coins and paper money to be an integral part of legal tender.
Different jurisdictions understand and define legal tender differently. As a result, cashless forms of payment such as credit cards and cheques are never considered legal tender. The designation and specification of a national currency by legal norms and regulations should be recognized as a medium of exchange and as a source of payment of debts due. To the extent that legal tender includes all denominations in circulation, the sum of the coins and the value that can be accepted as legal tender differ from country to country. Money orders and cheques are not legal tender as they are only accepted at the discretion of the seller, lender or creditor. It is commonly referred to as legal money. U.S. legal tender regulations are very clear, although most people don`t like to think about the legal perspectives of the issue at hand. Section 31 of the Currency Act of 1965, entitled “Legal tender,” states that “United States coins and currencies (including Federal Reserve notes and circulation notes of Federal Reserve banks and national banks) are legal tender for all debts, public duties, taxes, and duties.
The Coinage Act of 1873 was replaced by the Coinage Act of 1965. The federal government introduced new regulations separating coins from silver and adjusted the silver content to half a dollar. Demonetization refers to the law that aims to eliminate the legal tender of a particular currency. This happens in most cases in situations where the country(ies) decide to have a different currency than the existing ones. This means that currently available currencies are removed from the system so that they no longer circulate. This is usually done in circumstances where the country intends to replace old currencies with new ones. This will be achieved through the introduction of alternative coins and banknotes. On the other hand, demonetization is the direct opposite of demonetization, where the country recognizes available currencies as legal tender.
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. Legal tender is a type of currency or medium of exchange. It is money that is valid and acceptable to pay off debts that must be recognized in question. U.S.
coins and currencies (including Federal Reserve notes and circulation notes from Federal Reserve banks and national banks) are legal tender for all debts, public duties, taxes, and duties. Foreign gold or silver coins are not legal tender for debts. The value of Federal Reserve notes is determined by federal law and the U.S. Department of the Treasury based on the country`s economic activity. Legal tender only works properly if the country`s economy functions properly. Federal Reserve notes have no expiration date, but many abandon circulation after so many years because they are beaten. 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 gold coins before 1933 are legal tender under the 1964 law. Fiat money has no intrinsic value. Its value depends on public confidence in the issuer of the currency.
Legal tender is any tender declared legal by a government. Many governments issue fiat currency and then make it legal by setting it as the standard for debt repayment. Although the Reserve Bank Act 1959 and the Currency Act 1965 stipulate that Australian notes and coins are legal tender, Australian notes and coins do not necessarily have to be used in transactions, and refusing to accept payments as legal tender is not illegal. It appears that a service provider is free to determine the commercial conditions under which payment is made before the conclusion of the “contract” of the supply or service. If a supplier of goods or services specifies other means of payment before the contract is concluded, there is generally no obligation to accept legal tender as payment. This is the case even if it is an existing debt. However, refusing to accept legal tender to settle an existing debt if no other means of payment/settlement has been determined in advance could have consequences in legal proceedings. [15] [16] Since 1st January 2002 euro banknotes and coins have been legal tender in most euro area countries.
Although one side of the coins is used for different national marks for each country, all banknotes and coins are legal tender throughout the euro area. Although some euro area countries do not put 1 cent and 2 cent coins into general circulation (prices in these countries are generally considered to be rounded to a full multiple of 5 cents), 1 cent and 2 cent coins from other euro area countries are still legal tender in these countries. In order to comply with the legal definition of “legal tender”, the exact amount due must be offered; No changes can be requested. [40] When the Iraqi Swiss dinar ceased to be legal tender in Iraq, it was still circulating in the northern Kurdish regions and had a stable market value for more than a decade despite the lack of state support. This example is often cited to show that the value of a currency is not derived solely from its legal status (but that this currency would not be legal tender). On 8 November 2016, Prime Minister Narendra Modi announced that the existing INR 500 and INR 1000 notes would no longer be accepted as legal tender in order to combat counterfeiting, tax evasion and the shadow economy. [27] The Reserve Bank of India has described a system whereby holders of such notes can either deposit them into their bank accounts for the full and unlimited value or exchange the notes for new ones, subject to a cap. [28] In 1965, the Coinage Act was passed, which defined the legal tender of the United States as U.S. coins and currency. This currency contained Federal Reserve banknotes circulating from national banks and the Federal Reserve.
The Currency Act formalized that this currency must be accepted as payment of taxes, fees, levies and debts. He also restored the value of U.S. commercial dollars, which had previously been demonetized. In general, Canadian dollar bank notes issued by the Bank of Canada and coins issued under the Royal Canadian Mint Act are legal tender in Canada.