What does "legal tender" mean?

[Hari_Seldon]

In the US, paper many says something like “Legal tender for all debts public and private” IIRC. In Canada it says only “This note is legal tender” in 2pt type. Does this have any meaning by itself or is it just a meaningless claim? What if you go into a restaurant, order and eat a meal and offer a $100 bill in payment and the restaurateur refuses to take it because he “Doesn’t take $100 bills”? What if the meal actually cost $100 so that making change is not an issue? Can you just walk out?

The reason for the question is a news report this morning of a guy who walked into the bank that held his mortgage with $3000 in cash to pay his monthly payment. He had done this before and expected the teller to take it away, count it, examine it for counterfeit and stamp his receipt. Instead the teller told him that they are no longer allowed to accept cash. He went to another bank, where he had an account, gave them the $3K plus $7.50 and got a cashier’s cheque for the amount, which the first bank accepted.

When the radio station (CBC 1) contacted the bank they were told that this was an “administrative error”. When they called the branch where this had happened and pretended to be a mortgager who wanted to make his payment in cash and were told that this was not permitted, the higher bank official notwithstanding.

The general question remains, what does “legal tender” mean? But if the mods want to move it to IMHO, that’s okay?

[iamthewalrus_3]

Yes, in both of those situations, cash is required to be accepted, since a debt has been incurred, and the money is legal tender for that debt.

Note that this is not the same as going up to the register to buy something and being turned away if they don’t take cash. You can’t force someone to take cash unless you already owe them money, and having a cart full of groceries with you (for example), does not create a debt. No transaction has yet been made.

[Elendil_s_Heir]

There’s this crazy new website the kids are calling “Wikipedia” which is a good place to go for questions like this: Legal tender - Wikipedia

[Skald_the_Rhymer]

As I understand it, and I could be wrong, legal tender means that a note must be accepted as payment for a debt, though not necessarily for a purchase.

Let’s say you manage a retail store in a bad neighborhood. You don’t want to keep cash around, so you decide that the only payments you’ll take for purchases are credit and debit cards. You can do that legally, because offering to make a purchase is not the same as borrowing money. For that matter, you can refuse to take payment for a $400 sofa in unrolled quarters. (I actually had a customer do that when I was working at Sears in the 90s). But if you decide to start issuing credit – say by establishing your own credit card – and further decide to take payments on said cards at the register, you can’t refuse to take legal tender as payments on the card (though you can decline to take credit card payments entirely).

[Hari_Seldon]

@Elendil_s_Heir

There’s this crazy new website the kids are calling “Wikipedia” which is a good place to go for questions like this: Legal tender - Wikipedia

The wiki entry does not explain what happens if the debt holder simply refuses. The guy offered the money, the bank refused. Now what? If he simply walks out, he still owes the money and the bank will start adding penalties. If this continues, the bank will eventually foreclose. He cannot even prove that the tendered the money.

[dougie_monty]

Mad once printed a $3.00 bill with a picture of Alfred E. Neuman and the message:
THIS IS NOT LEGAL TENDER
NOR WILL TENDERIZER HELP IT

[Omar_Little]

@Hari_Seldon

The wiki entry does not explain **what happens **if the debt holder simply refuses. The guy offered the money, the bank refused. Now what? If he simply walks out, he still owes the money and the bank will start adding penalties. If this continues, the bank will eventually foreclose. He cannot even prove that the tendered the money.

Well, if two parties have a disagreement, there are places called civil courts, where you can force another party to appear and have a judge or jury hear your arguments and decide who is right.

Just because the bank refuses to accept your legal tender and they then assess late penalties, doesn’t necessarily mean that you owe them.

[Doctor_Jackson]

@iamthewalrus_3

Yes, in both of those situations, cash is required to be accepted, since a debt has been incurred, and the money is legal tender for that debt.

Here is the US Treasury Dept page on that topic:

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. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services.

The restaurant example above does not constitue a debt and the restaurant is not a creditor, even if the meal is served before payment id expected. It would still fall under “goods and services”.

[OldGuy]

@Doctor_Jackson

The restaurant example above does not constitute a debt and the restaurant is not a creditor, even if the meal is served before payment id expected. It would still fall under “goods and services”.

Even if this is not a debt, I’d think the restaurant would be hard pressed to force the patron to pay some other way unless there had been an explicit understanding before hand. Suppose I see a restaurant menu that says $9.95 for a sandwich and order one. After I eat it, it seems a bit late to tell me, “Sorry we only accept gold dust at the market price in payment.”

If the restaurant can refuse cash for items listed with a $ price, what restricts them from, for example, requiring you to pay in kind. “Sorry, you have to clean the oven as payment.”

[iamthewalrus_3]

@Doctor_Jackson

The restaurant example above does not constitue a debt and the restaurant is not a creditor, even if the meal is served before payment id expected. It would still fall under “goods and services”.

If you’ve already eaten the food and they’re expecting payment, I don’t see how they’re not holding a debt.

If they charge you before providing the goods or services, then I agree.

[ALOHA_HATER]

@Hari_Seldon

When the radio station (CBC 1) contacted the bank they were told that this was an “administrative error”. When they called the branch where this had happened and pretended to be a mortgager who wanted to make his payment in cash and were told that this was not permitted, the higher bank official notwithstanding.

Can you link to the story?

@Doctor_Jackson

Here is the US Treasury Dept page on that topic:
The restaurant example above does not constitue a debt and the restaurant is not a creditor, even if the meal is served before payment id expected. It would still fall under “goods and services”.

This sounds like magicky technical definition of ‘debt,’ which isn’t a very technical concept. If you put a fiver on the bar and ask for a beer and they give you a beer, you bought a drink. If you only ask for and receive a beer, you owe them a few bucks. You are indebted to them for a few bucks.

You can offer somebody a newspaper in exchange for a poem. You can’t tell somebody you’re selling newspapers for a dollar, then reject their legal tender because you’d prefer a poem.

[UDS]

I’m inclined to agree that if you order and consume a meal to the value of $10, you have a debt to the restaurant of $10 until you settle the bill.

But it’s a moot point. If you offer a $10 bill and the restaurant refuses, and you then leave without paying by credit card as they want, what is their remedy? The can sue you and, if they win, they will have judgment for $10. And the judgment is a debt, for which you can insist on their accepting a $10 bill.

[usedtobe]

It is my understanding that it IS possible to structure a contract such that cash payments are specifically excluded. Mortgage payments would seem to be an excellent example.

“X agrees to pay $100.00 on the first of each month, by personal check, certified fund or wire transfer or as Lender may specify in the future” would preclude cash payments.
If pushed and the entire outstanding balance were presented in cash, anyone have specific knowledge wherein the periodic payment is not permitted in cash, but there is no mention of entire principle.

"I’d like to borrow $322,592.31. Yes sir, how long would you need this? About 2 hours.

As stated above, it must be for a PREEXISTING debt.

The classic is a private loan - I buy a car from you, giving your 80% now, and the remainder next month. I offer you a stack of twenties on Friday (back in the day, obviously) and you don’t want to have that much sitting around the house over the weekend. “Come back Monday”. Collecting witness signatures… don’t think so. Thanks!

[bob_2]

It seems to be general practice these days for organisations that prefer not to be paid in cash because of the costs of dealing with it, to simply charge extra. My energy supplier, for example, gives me a discount because I allow them to take the charge from my current account each month. I have a relative with a bad credit history, who has to buy a prepaid card and put it in her meter - she pays a lot more than me for her energy.

[Hari_Seldon]

Link: http://www.cbc.ca/player/Radio/Local+Shows/Quebec/Daybreak+Montreal/ID/2439705735/. Since he had done this previously, there was likely no agreement to pay by other than cash. If a bank can’t deal with cash, who will?

[Doctor_Jackson]

@iamthewalrus_3

If you’ve already eaten the food and they’re expecting payment, I don’t see how they’re not holding a debt.

If they charge you before providing the goods or services, then I agree.

Nope, either way it is payment for goods and/or services. Consuming a product does not create a lender/creditor relationship. Let me quote a bit more from the Treasury site:

For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

Most of the examples above are generally paid in advance of receiving the goods or services, but some gas stations still allow one to pump before paying. Those gas stations can still dictate the form of payment required.

From Snopes:

In other words, U.S. currency and coins can be used for making payments, but merchants do not necessarily have to accept it for all forms of business transactions. If a shoemaker wants to sell his products for 8000 jelly beans per pair, he’s entitled to do so; the buyer cannot demand that he accept the equivalent value in legal tender instead. However, legal tender is the default method of payment assumed in contractual agreements involving debts and payments for goods or services unless otherwise specified. .
So, for example, if an automobile dealer signs a contract agreeing to sell you a car for $8,000, but when you begin making monthly payments he rejects them and insists he wants to be paid in gold instead, you can go to court and have your debt discharged on the grounds that valid payment was offered and refused.

[DrDeth]

The idea behind Legal tender is that the Govt can make you take Dollars instead of e.g. Euros or Gold coins. Since the time of the Continental Dollar, this has not really been a issue. Thus, there are no 'enabling" laws on the books. As the site puts it *"There is, however, no Federal statute mandating that … must accept currency or coins as for payment for goods and/or services. " *

Deep in Federal banking regs, one thing regulators check off is a "legal tender’ question, so in theory banks are required to accept US Dollars as well as a Government entity. But again, there’s no law that makes this a crime.

There’s a number of other things that are technically “illegal” but for whom there is no enabling or penalty statute.

There’s no need for a penalty as the US dollar is one of the most sought after currencies in the world.

However, legal tender is the default method, so unless the merchant sez up front what he’ll accept, and you incur a debt, he can’t just refuse dollars afterwards and insist upon Yap stone money.

This would lead to a great many scams, especially in the used car market. You’d buy a car on payments and “buy here, pay here” the used car scamster then insists you pay in Gold eagles @ face value, then repos the car for failure to make payments. Any court would laugh at this attempt.

[md2000]

As I understand it, “legal tender” means you must accept that as payment for debts.

When a transaction becomes a debt is a lively debate for first-year law classes, I hear. However, the transaction basically goes like this? (IANAL I’m sure one will chime in to correct me)

A transaction is essentially a contract - a consideration for a consideration.
Transaction offered
accepted - creates a contract
goods and payment exchanged - or terms for payment arranged.

Once a “contract” is created and a debt is part of that contract, unless the intial agreement was settled with different terms, monetary obligations can be settled with legal tender.

If an attempt to pay a debt with legal tender is refused, the debt is cancelled. I have head this quite often, but it may or may not apply in many cases. IIRC a “good faith” attempt to pay on a debt - there is an obligation on the debt holder to accept.

The exception - I’ve heard that nuisance offers - the $100,000 bill or 30,000 pennies - are excepted. Legitimate offers to pay part or all of the debt in legal tender must be accepted, or else you are releasing the debtor from their obligation.

If the restaurant or gas station states clearly where the customer reasonably should have noted “credit cards only” then that is obviously a condition of the contract. The buyer agrees to the condition by proceeding with the purchase.

If you get to the cash register and the cashier says “dubloons only, please” then you have not yet completed the contract. the act of ringing in your purchase (likely) or handing over the bag and demanding payment is the actual point where a debt is created.

Similarly, McDonalds is not a sale until you hand over the cash and get the bag. Youc an walk away anytime before that, and you will piss them off but you have not “stolen” anything. (If they went through some expense, there’s teh whole implied contract and expenses in anticipation that probably makes law professors drool while composing exams…)

However, if you order food and start eating it, you have “taken delivery” and incurred a debt. they must accept legal tender (cash) unless you were warned beforehand it was not acceptable.

As others mentioned, the issue came up when the ne continental government began printing too much money; people refused to accept it and demanded other money (british pounds, pieces of eight) instead. To ensure the currrency had meaning laws were passed requiring the money to be accepted as payment for debts.

[md2000]

By process of elimination, a debtor is NOT obliged to acept payment that is not legal tender. The merchant can refuse (in the USA) to accept Reichsmarks, British pounds, or gold dust.

[iamthewalrus_3]

@Doctor_Jackson

Nope, either way it is payment for goods and/or services. Consuming a product does not create a lender/creditor relationship. Let me quote a bit more from the Treasury site:
Most of the examples above are generally paid in advance of receiving the goods or services, but some gas stations still allow one to pump before paying. Those gas stations can still dictate the form of payment required.

But, as ALOHA HATER points out, what are they doing to do about it?

If I’ve already eaten a meal and they won’t take my money, then what? I guess they could call the police on me. I think they’ll look pretty silly explaining that they want me arrested for nonpayment when I’m standing there offering payment. They could sue me for their damages, but then they end up with a debt that I can settle with cash.

For all practical purposes, if you provide the goods and services prior to payment, you have to accept cash as payment.