Legal tender or forced tender is an offered payment A payment is the transfer of wealth from one party to another. A payment is usually made in exchange for the provision of goods, services or both, or to fulfill a legal obligation that, by law Law is a system of rules, usually enforced through a set of institutions. Laws can shape or reflect politics, economics and society in numerous ways and serves as a primary social mediator of relations between people. Contract law regulates everything from buying a bus ticket to trading on derivatives markets. Property law defines rights and, cannot be refused in settlement of a debt Debt is that which is owed; usually referencing assets owed, but the term can also cover moral obligations and other interactions not requiring money. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall, and have the debt remain in force.^[1] Currency In economics, the term currency can refer to a particular currency, for example Pound Sterling, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation's money supply. The other part of a nation's money supply consists of money deposited in banks , ownership of which can be transferred by means of is the most common form of legal tender.

The origin of the word is from Middle English tendren, from Anglo-French tendre (verb form), meaning to offer. The Latin root is tenēre (to hold), and the sense of tender as an offer is related to the etymology of the English word extend (to hold outward). ^[2] The noun form of a tender as an offering is a back-formation of the noun from the verb.

Legal tender is variously defined in different jurisdictions Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility. The term is also used to denote the geographical area or subject-matter to which such authority. Formally, it is anything which when offered in payment extinguishes the debt. Thus, personal cheques A cheque or check is a piece of paper (usually) that orders a payment of money. The person writing the cheque, the drawer or maker, usually has a chequing account where their money is deposited. The maker writes the various details including the money amount, date, and a payee on the cheque, and signs it, ordering their bank, know as the drawee,, credit cards A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer from which the user can borrow money for payment to a merchant or as a cash advance to the, debit cards A debit card is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so and similar non-cash methods of payment are not usually legal tender. The law does not relieve the debt until payment is accepted. Coins Coins are usually metal or a metallic material and sometimes made of synthetic materials, usually in the shape of a disc, and most often issued by a government. Coins are used as a form of money in transactions of various kinds, from the everyday circulation coins to the storage of large numbers of bullion coins. In the present day, coins and and notes A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. Along with coins, banknotes make up the cash or bearer forms of all modern fiat money. With the exception of non-circulating high-value or precious metal commemorative issues, are usually defined as legal tender. Some jurisdictions may forbid or restrict payment made other than by legal tender. For example, such a law might outlaw the use of foreign coins and bank notes, or require a license The verb license or grant license means to give permission. The noun license refers to that permission as well as to the document memorializing that permission to perform financial transactions A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. In accounting, it is recognized by an entry in the books of account. It involves a change in the status of the finances of two or more businesses or individuals in a foreign currency.

In some jurisdictions legal tender can be refused as payment if no debt exists prior to the time of payment (where the obligation to pay may arise at the same time as the offer of payment). For example vending machines A vending machine provides snacks, beverages, lottery tickets, and other products to consumers without a cashier. Items sold via these machines vary by country and region and transport staff do not have to accept the largest denomination of banknote. Shopkeepers can reject large banknotes — this is covered by the legal concept known as invitation to treat Invitation to treat is a contract law term. It comes from the Latin phrase invitatio ad offerendum and means an "inviting an offer". Or as Andy Burrows writes, an invitaton to treat is. However, restaurants A restaurant prepares and serves food, drink and dessert to customers. Meals are generally served and eaten on premises, but many restaurants also offer take-out and food delivery services. Restaurants vary greatly in appearance and offerings, including a wide variety of cuisines and service models that do not collect payment until after a meal is served would have to accept that legal tender for the debt incurred in purchasing the meal.

The right, in many jurisdictions, of a trader to refuse to do business with any person means a purchaser cannot demand to make a purchase, and so declaring a legal tender in law, as anything other than an offered payment for debts already incurred, would not be effective.

Australia

In Australia For at least 40,000 years before European settlement in the late 18th century, Australia was inhabited by indigenous Australians, who belonged to one or more of the roughly 250 language groups. After sporadic visits by fishermen from the immediate north and discovery by Dutch explorers in 1606, Australia's eastern half was claimed by the British, the creation of legal tender, in the form of notes and base metal In chemistry, the term base metal is used informally to refer to a metal that oxidizes or corrodes relatively easily, and reacts variably with diluted hydrochloric acid to form hydrogen. Examples include iron, nickel, lead and zinc. Copper is considered a base metal as it oxidizes relatively easily, although it does not react with HCl. It is coins, is the exclusive right of the Commonwealth Government. According to the Commonwealth Of Australia Act - Sect 115,^[3] which states: "A State shall not coin money, nor make anything but gold and silver coin a legal tender in payment of debts." Under this provision the Perth Mint The Perth Mint is Australia's oldest currently operating mint[citation needed], owned by the Western Australian Western Australia is a state of Australia, occupying the entire western third of the Australian continent. Australia's largest state and the second largest subnational entity in the world, it has 2.2 million inhabitants , 85% of whom live in the south-west corner of the state Government, still produces gold and silver coins with legal tender status, the Australian Gold Nugget The Australian Gold Nugget is a gold bullion coin minted by the Perth Mint. The coins have been minted in denominations of 1/20 oz, 1/10 oz, 1/4 oz, 1/2 oz, 1 oz, 2 oz, 10 oz, and 1 kg of 24 carat gold. They have legal tender status in Australia and are one of few legal tender bullion gold coins to change their design every year, another being the and Australian Silver Kookaburra The Silver Kookaburra is a silver bullion coin originating from Australia. The coins are .999 fine silver. They are produced in the following four sizes:. These, however, although having the of status of legal tender, are almost never circulated or used in payment of debts, and are mostly considered bullion coins A bullion coin is a coin struck from precious metal and kept as a store of value or an investment, rather than used in day-to-day commerce. Bullion coins are usually available in gold and silver, with the exception of the Krugerrand and the Swiss Vreneli which are only available in gold. The American Eagle series is available in gold, silver and.

Australian notes are legal tender, as established by the Reserve Bank Act 1959^[4] for all amounts. Australian coins for general circulation, now produced at the Royal Australian Mint The Royal Australian Mint is situated in the Australian federal capital city of Canberra, in the suburb of Deakin in Canberra Canberra (pronounced /ˈkænbrə, ˈkænbɛrə/) is the capital city of Australia. With a population of over 345,000, it is Australia's largest inland city and the eighth-largest city overall. The city is located at the northern end of the Australian Capital Territory (ACT), 280 km (170 mi) south-west of Sydney, and 660 km (410 mi) north-east of, are also legal tender, under the provisions of the Currency Act 1965,^[5] but only for the following amounts:

• not exceeding 20¢ if 1¢ and/or 2¢ coins are offered;
• not exceeding $5 if any of 5¢, 10¢, 20¢ and 50¢ coins are offered;
• not exceeding 10 times the face value if coins in the range 50¢ to $10 inclusive are offered;
• to any value if face value is greater than $10 are offered.

The one cent and two cent coins have been withdrawn from circulation since 1994, but they remain legal tender.

According to the Reserve Bank of Australia,^[6] the legal framework^[7] for legal tender in Australia For at least 40,000 years before European settlement in the late 18th century, Australia was inhabited by indigenous Australians, who belonged to one or more of the roughly 250 language groups. After sporadic visits by fishermen from the immediate north and discovery by Dutch explorers in 1606, Australia's eastern half was claimed by the British is somewhat unclear. The Reserve Bank Act 1959^[4] and Currency Act 1965^[5] establish that it is not legally required to accept legal tender, even for an existing debt, although failure to do so may be prejudicial in future legal proceedings.

History

In 1901 notes in circulation in Australia For at least 40,000 years before European settlement in the late 18th century, Australia was inhabited by indigenous Australians, who belonged to one or more of the roughly 250 language groups. After sporadic visits by fishermen from the immediate north and discovery by Dutch explorers in 1606, Australia's eastern half was claimed by the British consisted of bank notes payable in gold coin and issued by the trading banks, and Queensland Treasury notes. Bank notes circulated in all States except Queensland Coordinates: 23°0′S 143°0′E / 23°S 143°E Queensland is a state of Australia that occupies the north-eastern section of the mainland continent. It is bordered by the Northern Territory to the west, South Australia to the south-west and New South Wales to the south. To the east, Queensland is bordered by the Coral Sea and Pacific Ocean, but were not legal tender except for a brief period in 1893 in New South Wales New South Wales , Australia's most populous state, is located in the south-east of the country, north of Victoria, south of Queensland, east of South Australia and encompasses the whole of the Australian Capital Territory. It was founded in 1788 and originally comprised much of the Australian mainland, as well as Van Diemen's Land, Lord Howe. There were, however, some restrictions on their issue or other provisions for the protection of the public. Queensland Treasury notes were issued by the Queensland Government and were legal tender in that State. Notes of both categories continued in circulation until 1910, when the Australian Notes Act 1910 and Bank Notes Tax Act 1910 were passed by the Commonwealth Parliament. The Australian Notes Act 1910 prohibited the circulation of State notes as money and the Bank Notes Tax Act 1910 imposed a tax of ten per cent per annum on 'all bank notes issued or re-issued by any bank in the Commonwealth after the commencement of this Act, and not redeemed'. These Acts put an end to the issue of notes by the trading banks and the Queensland Treasury. The Reserve Bank Act 1959^[4] expressly prohibits persons and states from issuing 'a bill or note for the payment of money payable to bearer on demand and intended for circulation'.

Canada

Canadian dollar The Canadian dollar is the currency of Canada. It is normally abbreviated with the Dollar/Peso sign $, or C$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents. As of 2007, the Canadian dollar was the 7th most traded currency in the world, behind the US dollar, the euro, the yen, the pound sterling, the Swiss banknotes issued by the Bank of Canada The Bank of Canada is Canada's central bank. It was created by the Bank of Canada Act of 1934, a law giving it a monopoly on the issuance of banknotes. How much money it creates influences the value of the Canadian dollar. Its stated purpose is to "promote the economic and financial well-being of Canada." are legal tender in Canada The land occupied by Canada was inhabited for millennia by various groups of Aboriginal peoples. Beginning in the late 15th century, British and French expeditions explored, and later settled, along the Atlantic coast. France ceded nearly all of its colonies in North America in 1763 after the Seven Years' War. In 1867, with the union of three. However, commercial transactions may legally be settled in any manner agreed by the parties involved with the transactions. For example, convenience stores may refuse $100 bank notes if they feel that would put them at risk of being counterfeit A counterfeit is an imitation, usually one that is made with the intent of fraudulently passing it off as genuine. Counterfeit products are often produced with the intent to take advantage of the established worth of the imitated product. The word counterfeit frequently describes both the forgeries of currency and documents, as well as the victims; however, official policy suggests that the retailers should evaluate the impact of that approach. In the case that no mutually acceptable form of payment can be found for the tender, the parties involved should seek legal advice.^[8]

Eurozone

Euro The euro is the official currency of the Eurozone: 16 of the 27 Member States of the European Union (EU) and is the currency used by the EU institutions. The eurozone consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. Estonia is due to coins and banknotes became legal tender in most countries of the Eurozone The eurozone ( pronunciation ), officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted the euro currency as their sole legal tender. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, on January 1, 2002. Although one side of the coins is used for different national marks for each country, all coins and all banknotes are legal tender throughout the eurozone The eurozone ( pronunciation ), officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted the euro currency as their sole legal tender. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal,. Therefore, it is possible to find Irish euro coins Irish euro coins all share the same design by Jarlath Hayes, that of the harp, a traditional symbol for Ireland since the Middle Ages, based on that of the Brian Boru harp, housed in Trinity College, Dublin. The same harp is used as the official seals of the Taoiseach, and government ministers and the Official Seal of the President of Ireland. The in Greece Greece (English: /ˈɡriːs/ ; Greek: Ελλάδα, Elláda, IPA: [eˈlaða] ( listen); Ancient Greek: Ἑλλάς, Hellás, IPA: [helːás]), also known as Hellas and officially the Hellenic Republic (Ελληνική Δημοκρατία, Ellīnikī́ Dīmokratía, IPA: [eliniˈci ðimokraˈtia]), is a country in southeastern Europe, situated on and Finnish euro coins Finnish euro coins feature three separate designs. Heikki Häiväoja provided the design for the 1 cent – 50 cent coins, Pertti Mäkinen provided the design for the 1 euro coin, and Raimo Heino provided the design for the 2 euro coin, which shows cloudberry, the golden berry of northern Finland. All designs feature the 12 stars of the EU and the in Portugal Portugal /ˈpɔɹtʃʉɡəl/ (Portuguese: Portugal, Mirandese: Pertual), officially the Portuguese Republic (Portuguese: República Portuguesa; Mirandese: República Pertuesa), is a country located in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe and is bordered by the Atlantic Ocean to the west and, for instance. Although some eurozone countries do not put 1 cent and 2 cent coins into general circulation (prices in those countries are by general understanding always set in whole multiples of 5 cent), 1 cent and 2 cent coins from other eurozone countries remain legal tender in those countries.

European Regulation EC 974/98 limits the number of coins that can be offered for payment to fifty.^[9] National laws may also impose restrictions as to maximal amounts that can be settled by coins or notes.

France

Historically, legal tender was enacted the first time in 1870 for all notes and coins of the Banque de France The Banque de France is the central bank of France; it is linked to the European Central Bank . Its main charge is to implement the interest rate policy of the European System of Central Banks (ESCB). It is headquartered in Paris. Anyone refusing such monies for their whole value would be prosecuted (French Penal Code art. R. 642-3).

Republic of Ireland

According to the Economic and Monetary Union Act, 1998 of the Republic of Ireland Ireland (pronounced /ˈaɪərlənd/ , locally [ˈaɾlənd], Irish: Éire, pronounced [ˈeːɾʲə] ( listen)), described as the Republic of Ireland (Irish: Poblacht na hÉireann), is a country in north-western Europe. The modern sovereign state occupies about five-sixths of the island of Ireland, which was partitioned into two jurisdictions in 1921 which replaced the legal tender provisions that had been re-enacted in Irish legislation from previous British enactments, No person, other than the Central Bank of Ireland The Central Bank and Financial Services Authority of Ireland is the financial services regulator of Ireland and historically the central bank. The bank was the issuer of Irish pound banknotes and coinage until the introduction of the euro currency, and now provides this service for the European Central Bank and such persons as may be designated by the Minister by order, shall be obliged to accept more than 50 coins denominated in euro or in cent in any single transaction.

Irish history

The Decimal Currency Act, 1970 governed legal tender prior to the adoption of the euro and laid down the analogous provisions as in United Kingdom legislation (all inherited from previous British law The United Kingdom has three legal systems. English law, which applies in England and Wales, and Northern Ireland law, which applies in Northern Ireland, are based on common-law principles. Scots law, which applies in Scotland, is a pluralistic system based on civil-law principles, with common law elements dating back to the High Middle Ages. The), namely: coins denominated above 10 pence became legal tender for payment not exceeding 10 pounds, coins denominated not more than 10 pence became legal tender for payment not exceeding 5 pounds, and bronze coins became legal tender for payment not exceeding 20 pence.

India

The Indian rupee The Indian rupee (sign: ; code: INR) is the official currency of India. The issuance of the currency is controlled by the Reserve Bank of India is the de-facto legal tender currency in India India, officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with 1.18 billion people, and the most populous democracy in the world. Mainland India is bounded by the Indian Ocean on the south, the Arabian Sea on the west, and the Bay of Bengal on the. The Indian rupee is also legal tender in Nepal Nepal (pronounced /nəˈpal/ nə-PAHL, /-pal/ -PAWL; Nepali: नेपाल [neˈpal] ), officially the Federal Democratic Republic of Nepal, is a himalayan country in South Asia and, as of 2010, the world's most recent nation to become a republic. It is bordered to the north by the People's Republic of China, and to the south, east, and west by and Bhutan Coordinates: 27°25′01″N 90°26′06″E / 27.417°N 90.435°E The Kingdom of Bhutan is a landlocked country in South Asia, located at the eastern end of the Himalaya Mountains and bordered to the south, east and west by the Republic of India and to the north by the Tibet Autonomous Region of the People's Republic of China. Bhutan is, although the Nepalese rupee The rupee (sign: ₨; code: NPR) is the official currency of Nepal. It is subdivided into 100 paisa. The issuance of the currency is controlled by the Nepal Rastra Bank. The most commonly used symbol for the Rupee is Rs or ₨ and Bhutanese ngultrum The ngultrum (Dzongkha: དངུལ་ཀྲམ) has been the currency of Bhutan since 1974. It is subdivided into 100 chhertum (called chetrums on coins until 1979) are not legal tender in India. The value of both the Nepalese rupee and Bhutanese ngultrum are pegged with the Indian rupee. ^[10]

In previous times, the Indian rupee was regarded as an official currency of other countries, including the Straits Settlements (now Singapore and parts of Malaysia), Kuwait, Bahrain, Qatar, and the Trucial States (now the UAE).

In 1837, the Indian rupee was made the sole official currency of the Straits Settlements, as it was administered as a part of India. In 1845, the British replaced the Indian rupee with the Straits dollar after administration of the Straits Settlements separated from India earlier in that same year.

After partition of India and Pakistan in 1947, the Pakistani Rupee came into existence, initially using Indian coins and Indian currency notes simply overstamped with the word "Pakistan". New coins and banknotes were issued in 1948.

The Gulf Rupee, also known as the Persian Gulf Rupee (XPGR), was introduced by the Government of India as a replacement for the Indian rupee for circulation exclusively outside the country with the Reserve Bank of India Amendment Act May 1, 1959. This creation of a separate currency was an attempt to reduce the strain put on India's foreign reserves by gold smuggling.

Two states, Kuwait and Bahrain eventually replaced the Gulf rupee with their own currencies (the Kuwaiti dinar and the Bahraini dinar) after gaining independence from Britain in 1961 and 1965, respectively.

On 6 June 1966, India devalued the rupee. To avoid following this devaluation, several of the states using the rupee adopted their own currencies. Qatar and most of the Trucial States adopted the Qatar and Dubai riyal, whilst Abu Dhabi adopted the Bahraini dinar. Only Oman continued to use the Gulf rupee until 1970, with the government backing the currency at its old peg to the pound. Oman later replaced the Gulf rupee with its own rial in 1970.

New Zealand

New Zealand has had a complex history of legal tender. At the creation of the colony after the signing of the Treaty of Waitangi in 1840 there was no legal tender in New Zealand, because although the Treaty authorised the British Crown to govern, the laws of the England had not been formally adopted by the new colony.

The English Laws Act 1858 retrospectively adopted the laws of England, and through the UK's Coinage Act 1816 British coins were confirmed as legal tender in New Zealand. Unusually until 1989 the Reserve Bank did not have the right to issue coins as legal tender. Coins had to be issued by the Minister of Finance.

The history of bank notes was considerably more complex. In 1840 the Union Bank started issuing bank notes under provisions of British law but these were not automatically legal tender.

In 1844 Ordinances were passed making the Union Bank banknotes legal tender and authorising the government to issue debentures in small denominations, thus creating two sets of legal tender. These debentures were circulated but were traded at a discount to their face value because of distrust of the colonial government by the settler population. In 1845 the Ordinance was disallowed by the British Colonial office and they were recalled, but not without first causing a panic amongst holders of the debentures.

In 1847 the Colonial Bank of Issue became the only issuer of legal tender. In 1856 however the Colonial Bank of Issue was disbanded and through the Paper Currency Act 1856 the Union Bank was confirmed once again as an issuer of legal tender. The Act also authorised the Oriental Bank to issue legal tender but this bank ceased operations in 1861.

Between 1861 and 1874 a number of other banks including the Bank of New Zealand, Bank of New South Wales, National Bank of New Zealand and Colonial Bank of New Zealand were created by Acts of Parliament and authorised to issue bank notes backed by gold, however these notes were not legal tender.

The 1893 Bank Note Issue Act allowed the government to declare a bank's right to issue legal tender. This enabled the government to make such a declaration to assist the Bank of New Zealand when in 1895 the bank encountered financial difficulties that could have led to its failure.

The 1914 Banking Amendment Act gave legal tender status to bank notes from any issuer and removed the requirement that banks authorised to issue bank notes must redeem them on demand for gold (the gold standard).

In 1933 the Coinage Act created a specific New Zealand coinage and removed legal tender status from British coins. In the same year the Reserve Bank of New Zealand was established. The bank was given a monopoly on the issue of legal tender. The Reserve Bank also provided a mechanism through which the other issuers of legal tender could phase out their bank notes. These banknotes were convertible into British legal tender on demand at the Reserve Bank and remained so until the 1938 Sterling Exchange Suspension Notice that suspended provisions of a 1936 amendment of the 1933 Reserve Bank of New Zealand Act.

The 1964 Reserve Bank of New Zealand Act restated that only notes issued by the Reserve Bank were legal tender. The Act also ended the right of individuals to redeem their bank notes for coin, effectively ending the distinction between coin and notes in New Zealand. The Act came into force in 1967 establishing as legal tender all New Zealand dollar five dollars banknotes and greater, all decimal coins, the pre-decimal sixpence, the shilling, and the florin. Also passed in 1964 was the Decimal Currency Act which created the basis for a decimal currency which was also introduced in 1967.

As at 2005 banknotes were legal tender for all payments, $1 and $2 coins were legal tender for payments up to $100, and 5c, 10c, 20c, and 50c silver coins were legal tender for payments up to $5. These older style silver coins were legal tender until October 2006, after which only the new 10c, 20c and 50c coins, introduced in August 2006, will be legal.^[11]

Singapore and Brunei

The Singapore dollar is legal tender in Brunei since a Currency Interchangeability Agreement was signed on 1967-06-12. Brunei dollar banknotes (but not coins) are widely accepted throughout Singapore and represent a "customary tender".^[12]

Switzerland and Liechtenstein

The Swiss franc is the only legal tender in Switzerland. Any payment consisting of up to 100 Swiss coins is legal tender; banknotes are legal tender for any amount.^[13]

The sixth series of Swiss bank notes from 1976, recalled by the National Bank in 2000, is no longer legal tender, but can be exchanged in banks for current notes up until April 2020.

The Swiss franc is also the legal tender of the Principality of Liechtenstein, which is joined to Switzerland in a customs union.

The Swiss franc is also the currency used for administrative and accounting purposes by most of the numerous international organisations that are headquartered in Switzerland.

United Kingdom

British history

In the 19th century, gold coins were legal tender to any amount, silver coins were not legal tender for sums over 2 pounds, nor bronze for sums over 1 shilling.

This provision was retained in revised form at the introduction of decimal currency, and the Coinage Act 1971 laid down that coins denominated above 10 pence became legal tender for payment not exceeding 10 pounds, coins denominated not more than 10 pence became legal tender for payment not exceeding 5 pounds, and bronze coins became legal tender for payment not exceeding 20 pence.

England and Wales

Bank of England notes are the only banknotes that are legal tender in England and Wales and are issued for in the amount of £5, £10, £20 and £50. United Kingdom coinage is legal tender, but in limited amounts for coins below £2.^[14][15]

Scotland and Northern Ireland

Scottish and Northern Irish bank notes are issued by retail banks rather than a national central bank, and as such are technically promissory notes rather than legal tender. Furthermore, Bank of England notes are legal tender only within England and Wales and therefore also have the legal status of promissory notes in Scotland and Northern Ireland. However, general agreement between banks within the United Kingdom is to treat all notes as legal tender. (See British bank notes.)

Coins

In the United Kingdom, only coins valued 1 pound Sterling, 2 pounds, and 5 pounds Sterling are legal tender in unlimited amounts throughout the territory of the United Kingdom. In accordance with the Coinage Act 1971,^[16] gold sovereigns are also legal tender for any amount. Although not specifically mentioned on them, the face values of gold coins are 50p, £1, £2 and £5, a mere fraction of their worth as bullion. The United Kingdom legislation that introduced the 1 pound coin left no United Kingdom-wide legal tender banknote.

Currently, 20 pence pieces and 50-pence pieces are legal tender in amounts up to 10 pounds; 5-pence pieces and 10-pence pieces are legal tender in amounts up to 5 pounds; and 1-penny pieces and 2-pence pieces are legal tender in amounts up to 20 pence.^[17]

United States

The U.S. Constitution, Art. I Sec. 10 Cl. 1, states, in part:

No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; ...

During the early American Civil War, the federal government first issued United States Demand Notes (the first greenback notes) which were redeemable in gold and silver coin. This resulted in a situation in which the greenback paper dollar was, by fiat, overvalued in terms of US gold and silver coin and so gold and silver were held and paper circulated. see: Gresham's Law. However, due to inevitable rejection of these Demand Notes, a money-strapped Congress which had to pay for the war eventually adopted the Legal Tender Act of 1862, issuing United States Notes backed only by treasury securities, and compelled the people to accept this rejected money as payment for all debts. Thus forced to accept federal banknotes, the recipients wanted to be able to use them to pay their own debts to each other, and this led to litigation from those who did not want to accept them, but instead preferred coin. The United States Supreme Court ruled the practice unconstitutional in Hepburn v. Griswold in 1870, but later reversed this decision following the appointment of two new judges by President Ulysses S Grant. The Court held that paper money, even that not backed by specie such as the United States Notes can be legal tender, in the Legal Tender Cases, ranging from 1871 to 1884.

On the other hand, coins made of gold or silver may not necessarily be legal tender, if they are not fiat money in the jurisdiction where they are preferred as payment. The United States Coinage Act of 1965 states (in part):

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are not legal tender for debts. —31 U.S.C. § 5103

This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor in the U.S.

Demonetisation

Coins and banknotes may cease to be legal tender if new notes of the same currency substitute them or if a new currency is introduced replacing the former one. Examples of this are:

• The United Kingdom, adopting decimal currency in place of pounds, shillings, and pence in 1971. Banknotes remained unchanged (except for the replacement of the 10 shilling note by the 50 pence coin). In 1968 and 1969 decimal coins which had precise equivalent values in the old currency (5p, 10p, 50p) were introduced, while decimal coins with no precise equivalent (½p, 1p, 2p) were introduced on 15 February 1971. The smallest and largest non-decimal circulating coins, the half penny and half crown, were withdrawn in 1969, and the other non-decimal coins with no precise equivalent in the new currency (1d, 3d) were withdrawn later in 1971. Non-decimal coins with precise decimal equivalents (6d ( = 2½p), 1 and 2 shillings) remained legal tender either until the coins no longer circulated (1980 in the case of the 6d), or the equivalent decimal coins were reduced in size in the early 1990s. The 6d coin was permitted to remain in large circulation throughout the United Kingdom due to the London Underground committee's large investment in coin-operated ticketing machines that used it.^{[citation needed]}. Old coins returned to the Royal Mint through the UK banking system will be redeemed for legal tender without time limits, however coins issued before 1947 have a higher value for their silver content than for their monetary value.
• The successor states of the Soviet Union replacing the Soviet ruble in the 1990s.
• Currencies used in the Eurozone before being replaced by the euro, are not legal tender but all banknotes are redeemable for euros for a minimum of 10 years (for certain notes there is no time limit).

Individual coins or banknotes may be demonetised and cease to be legal tender, for example, the pre-decimal United Kingdom farthing or the Bank of England 1 pound note, however the Bank of England does redeem all Bank of England banknotes for legal tender at its counters in London (or by post) regardless of how old they are. Banknotes issued by retail banks in the UK are not legal tender, however one of the criteria for legal protection under the Forgery and Counterfeiting Act is that banknotes must be payable on demand, therefore withdrawn notes remain a liability of the issuing bank without any time limits.

In the case of the euro, coins and banknotes of former national currencies were considered as legal tender from January 1, 1999, until February 28, 2002 (in some cases). Legally, those coins and banknotes were considered non-decimal sub-divisions of euro.

When the Iraqi Swiss dinar ceased to be legal tender in Iraq it still circulated in the northern Kurdish regions and despite lacking government backing it had a stable market value for more than a decade. This example is often cited to demonstrate that the value of a currency is not derived purely from its legal status.

This is also true of the paper money issued by the Confederate States of America during the American Civil War. Though Confederate currency became worthless by its own terms after the war, since it could only be redeemed a stated number of years after a peace treaty was signed between the Confederacy and the United States (which never happened as the Confederacy was defeated and dissolved), the value of Confederate currency today as a historical and collectible item is usually much greater than its face value.

Demonetisation is currently prohibited in the United States; the Coinage Act of 1965 (quoted in the previous section) applies to all U.S. coins and currency regardless of age. The closest historical equivalent in the U.S., other than Confederate money, was from 1933 to 1974, when the government banned most private ownership of gold bullion, including gold coins held for non-numismatic purposes; but today, even surviving pre-1933 gold coins are legal tender under the 1965 act.

Withdrawal from circulation

Banknotes and coins may be withdrawn from circulation, but remain legal tender. United States banknotes issued at any date remain legal tender even after they are withdrawn from circulation. Canadian 1- and 2-dollar bills remain legal tender even though they have been withdrawn and replaced by coins, while Canadian $1000 bills remain legal tender although they are removed from circulation as they arrive at a bank. However, Bank of England notes that are withdrawn from circulation generally cease to be legal tender although they remain redeemable for current currency at the Bank of England itself or by post. All paper and polymer issues of New Zealand banknotes issued from 1967 onwards (and 1- and 2-dollar notes until 1993) are still legal tender; 1- and 2-cent coins are no longer used in Australia and New Zealand.

Miscellanea

Sometimes currency issues such as commemorative coins or transfer bills may be issued that are not intended for public circulation but are nonetheless legal tender. An example of such currency is Maundy money. Some currency issuers, particularly the Scottish banks, issue special commemorative banknotes which are intended for ordinary circulation. As well, some standard coins are minted on higher-quality dies as 'uncirculated' versions of the coin, for collectors to purchase at a premium; these coins are nevertheless legal tender. Some countries issue precious-metal coins which have a currency value indicated on them which is far below the value of the metal the coin contains — these coins are known as "non-circulating legal tender" or "NCLT".

See also

• Currency
• Gresham's law
• Postage stamp demonetization
• Standard of deferred payment
• Seigniorage

Notes

1. ^ "Legal Tender Guidelines". British Royal Mint. http://www.royalmint.com/Corporate/policies/legal_tender_guidelines.aspx. Retrieved 2007-09-02.
2. ^ Definition of tender as verb, in Merriam-Webster. Retrieved July 13, 2009.
3. ^ "COMMONWEALTH OF AUSTRALIA CONSTITUTION ACT - SECT 115 States not to coin money". Austlii.edu.au. http://www.austlii.edu.au/au/legis/cth/consol_act/coaca430/s115.html. Retrieved 2010-05-03.
4. ^ ^{a b c} [1]
5. ^ ^{a b} [2]
6. ^ "Reserve Bank of Australia - Home Page". Rba.gov.au. http://www.rba.gov.au/. Retrieved 2010-05-03.
7. ^ [3]
8. ^ "Currency Counterfeiting - Frequently Asked Questions". Rcmp-grc.gc.ca. 2006-07-10. http://www.rcmp-grc.gc.ca/count-contre/faq-eng.htm. Retrieved 2010-05-03.
9. ^ "Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro" (PDF). Official Journal of the European Communities (Luxembourg) 41 (L 139): pp. 1–5. 1998-05-11. ISSN 0378-6978. OCLC 104948742. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1998:139:0001:0005:EN:PDF. Retrieved 2009-06-03.
10. ^ "Area Handbook Series/ Bhutan (Nepal and Bhutan) / Glossary". Country-data.com. http://www.country-data.com/frd/cs/bhutan/bt_glos.html. Retrieved 2010-05-03.
11. ^ "Reserve Bank of New Zealand: Bulletin Vol. 66 No. 1" (PDF). http://www.rbnz.govt.nz/research/bulletin/2002_2006/2003mar66_1matthews.pdf. Retrieved 2010-05-03.
12. ^ "The Currency Interchangeability Agreement". MAS. http://www.mas.gov.sg/currency/currency_info/Currency_Interchangeability_Agreement.html. Retrieved 2010-05-03.
13. ^ Art. 3 of the Swiss law on Monetary Unit and means of payment. German, French and Italian versions.
14. ^ "Legal Tender". Royal Mint. http://www.royalmint.com/corporate/policies/legal_tender_guidelines.aspx. Retrieved 2010-05-03.
15. ^ "The Legal Basis of Scottish Banknotes, James Hayes" (PDF). http://www.scottish.parliament.uk/business/research/briefings-03/sb03-51.pdf. Retrieved 2010-05-03.
16. ^ http://www.england-legislation.hmso.gov.uk/acts/acts1971/pdf/ukpga_19710024_en.pdf
17. ^ "Legal Tender Guidelines". British Royal Mint. http://www.royalmint.com/corporate/policies/legal_tender_guidelines.aspx. Retrieved 2009-03-09.

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