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.
Banknotes and coins can no longer be legal tender if they are replaced by new banknotes of the same currency or if a new currency is introduced to replace the previous currency. [6] Here are some examples: The Norwegian krone (NOK) is legal tender in Norway according to the Central Bank (Norwegian: Sentralbankloven) of 24 May 1985. [30] However, no one is obliged to accept more than 25 coins of each denomination (of which 1, 5, 10 and 20 NOK denominations are currently in circulation). 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] 1983 – Pub.
L. 97-452 inserts « duties, taxes and public charges » after « all debts ». In 1914, the Banking Amendment Act gave legal tender status to the banknotes of any issuer and removed the requirement that banks authorized to issue banknotes must exchange them for gold on demand (the gold standard). In a 1976 case, Miliangos v. George Frank Ltd, the House of Lords concluded that, in certain circumstances, English courts could order debts to be paid in currencies other than the pound sterling, setting a precedent of two centuries. In 1844, ordinances were passed making Union Bank banknotes legal tender and authorizing the government to issue debt securities in small denominations, creating two groups of legal tender. These bonds were put into circulation, but exchanged at a discount to their face value due to the distrust of the settler population towards the colonial government. In 1845, the British Colonial Office banned the ordinance and the obligations were recalled, but not before first causing panic among the holders.
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] Sometimes, monetary issues such as commemorative coins or transfer vouchers may be issued, which are not intended for public circulation, but are nevertheless legal tender. An example of such a currency is the Maundy currency. Some currency issuers, notably Scottish banks, issue special commemorative notes for normal circulation (although no Scottish or Northern Irish notes are legal tender in the United Kingdom). In addition, some standard coins are minted on higher-value dies as « non-circulating » versions of the coin, which collectors can purchase for an additional fee. These documents are nevertheless legal tender. Some countries issue precious metal coins on which a monetary value is indicated well below the value of the metal containing the coin: these coins are called « non-circulating legal tender » or « NCLT ». The Indian rupee is de facto legal tender in India. The Indian rupee is also legal tender in Nepal and Bhutan, but the Nepalese rupee and Bhutanese ngultrum are not legal tender in India.
The Nepalese rupee and the Bhutanese ngultrum are attached to the Indian rupee. [26] 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). 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] 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 the 19th century, gold coins were legal tender of any amount, but silver coins were not legal tender for sums greater than 2 pounds or bronze for sums greater than 1 shilling. This provision was retained in a revised form with the introduction of decimal money, and the Currency Act 1971 stipulated that coins over 10 pence became legal tender for the payment of up to £10, non-bronze coins with not more than 10 pence legal tender for the payment of no more than £5. and bronze coins having legal tender for the payment of not more than 20 pence. After the partition of India and Pakistan in 1947, the Pakistani rupee was created, initially with Indian coins and Indian banknotes simply stamped with the word « Pakistan ».
New coins and banknotes were issued in 1948. In order to comply with the legal definition of « legal tender », the exact amount due must be offered; No changes can be requested. [40] According to the Economic and Monetary Union Act 1998 of the Republic of Ireland, which replaced the legal tender provisions of Irish law taken from earlier UK laws, « no person other than the Central Bank of Ireland and such persons as may be designated by regulation by the Minister shall be required to accept more than 50 euro or cent coins in a single transaction ». As of 2005, banknotes were legal tender for all payments, and $1 and $2 coins were legal tender for payments up to $100, and 10c, 20c and 50c silver coins were legal tender for payments up to $5. These old silver coins were legal tender until October 2006, after which only the new 10c, 20c and 50c coins introduced in August 2006 remained legal. [29] The 1¢ and 2¢ coins were withdrawn from circulation as of February 1992, but they are still legal tender. [15] Demonetization is the act of depriving a monetary unit of its legal tender. It occurs whenever the national currency changes: the current form(s) of currency are withdrawn from circulation and withdrawn, often to be replaced by new notes or coins.
Sometimes a country completely replaces the old currency with a new currency. Individual notes or coins may be demonetised and lose their role as legal tender (e.g. the pre-decimal farthing of the United Kingdom or the 1 pound note of the Bank of England), but the Bank of England reimburses all Bank of England banknotes by exchanging them for legal tender at its London counters (or by post), regardless of age.
