Legal tender

Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt.[1] Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt.

Some jurisdictions allow contract law to overrule the status of legal tender, allowing for example merchants to specify that they will not accept cash payments.[2] Coins and banknotes are usually defined as legal tender in many countries, but personal cheques, credit cards, and similar non-cash methods of payment are usually not. Some jurisdictions may include a specific foreign currency as legal tender, at times as its exclusive legal tender or concurrently with its domestic currency. Some jurisdictions may forbid or restrict payment made by other than legal tender. 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 and transport staff do not have to accept the largest denomination of banknote. Shopkeepers may reject large banknotes, which is covered by the legal concept known as invitation to treat

The right, in many jurisdictions, of a trader to refuse to do business with any person means that a would-be purchaser may not force a purchase merely by presenting legal tender, as legal tender only must be accepted for debts already incurred.

Status by country


The Australian dollar, comprising notes and coins, is legal tender in Australia. Australian notes are legal tender by virtue of the Reserve Bank Act 1959, s.36(1),[12] without an amount limit. The Currency Act 1965[13] similarly provides that Australian coins intended for general circulation are also legal tender, 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 the coins offered are greater than 50¢ up to and including $10,
  • to any value for coins of other denominations above $10.[14]

The 1¢ and 2¢ coins were withdrawn from circulation from February 1992 but remain legal tender.[15]


In general, Canadian dollar banknotes issued by the Bank of Canada and coins issued under the authority of the Royal Canadian Mint Act are legal tender in Canada. 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 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.[21]

Under the Currency Act, there are limits to the value of a transaction for which only coins are used.[22] A payment in coins is a legal tender for no more than the following amounts for the following denominations of coins:

  1. $40 if the denomination is $2 to $10,
  2. $25 if the denomination is $1,
  3. $10 if the denomination is 10c to $1,
  4. $5 if the denomination is 5c, and
  5. 25c if the denomination is 1c.

In the case of coins of a denomination greater than $10, a payment is a legal tender for no more than the value of a single coin of that denomination. Where more than one amount is payable by one person to another on the same day under one or more obligations, the total of those amounts is deemed to be one amount due and payable on that day.

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.[32]

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 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

Legal tender is solely for the guaranteed settlement of debts and does not affect any party’s right of refusal of service in any transaction.[38]

In the 19th century, gold coins were legal tender to any amount, but 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, non-bronze 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.

Throughout the United Kingdom, coins valued 1 pound, 2 pounds, and 5 pounds sterling are legal tender in unlimited amounts. Twenty pence pieces and fifty pence pieces are legal tender in amounts up to 10 pounds; five pence pieces and ten pence pieces are legal tender in amounts up to 5 pounds; and pennies and two pence coins are legal tender in amounts up to 20 pence.[38] In accordance with the Coinage Act 1971,[39] gold sovereigns are also legal tender for any amount. Although it is 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. Five pound coins, although legal tender, are intended as souvenirs and are almost never seen in circulation.

To meet the legal definition of legal tender, the exact amount due must be tendered; no change can be demanded.[40]

Maundy money is legal tender but may not be accepted by retailers and is worth much more than face value due to its rarity value and silver content.

Bank of England notes are legal tender in England and Wales and are issued in the denominations of £5, £10, £20 and £50. They can always be redeemed at the Bank of England even if discontinued. Banknotes issued by Scottish and Northern Irish banks are not legal tender anywhere but are widely accepted with agreement between parties.[41]

United States

Before the Civil War (1861 to 1865), silver coins were legal tender only up to the sum of $5. Before 1853, when U.S. silver coins were reduced in weight 7%, coins had exactly their value in metal (from 1830 to 1852). Two silver 50 cent coins had exactly $1 worth of silver. A gold U.S. dollar of 1849 had $1 worth of gold. With the flood of gold coming out of the California mines in the early 1850s, the price of silver rose (gold went down). Thus, 50 cent coins of 1840 to 1852 were worth 53 cents if melted down. The government could increase the value of the gold coins (expensive) or reduce the size of all U.S. silver coins. With the reduction of 1853, a 50-cent coin now had only 48 cents of silver. This is the reason for the $5 limit of silver coins as legal tender; paying somebody $100 in the new silver coins would be giving them $96 worth of silver. Most people preferred bank check or gold coins for large purchases.

During the early American Civil War, the federal government first issued United States Notes (the first greenback notes), which were not redeemable in gold and silver coins but could be used to pay “all dues” to the federal government. Since land purchases and duties on imports were payable only in gold or the new Demand Notes, the Demand Notes were bought by importers and land speculators for about 97 cents on the gold dollar and never lost value. 1862 greenbacks (Legal Tender Notes) at first traded for 97 cents on the dollar but gained/lost value depending on fortunes of the Union army. The value of Legal Tender Greenbacks swung wildly but trading was from 85 to 33 cents on the gold dollar.

This resulted in a situation in which the greenback “Legal Tender” notes of 1862 were fiat, and so gold and silver were held and paper circulated at a discount because of Gresham’s law. The 1861 Demand Notes were a huge success but robbed the customs house of much needed gold coin (interest on most bonds back then was paid in gold). 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 the new notes at a discount; prices rose except for those who had gold and/or silver coins.

Following the Civil War, paper currency was disputed as to whether it must be accepted as payment. In 1869, Hepburn v. Griswold found that Henry Griswold would not have to accept paper currency because it could not truly be “legal tender” and was unconstitutional as a legally enforceable means to pay debts. This led to the Legal Tender Cases in 1870, which overturned the previous ruling and established the paper currency as constitutional and proper legal tender that must be accepted in all situations.[42]

With the 1884 Supreme Court ruling in Juilliard v. Greenman, the “Supreme Court ruled that Congress had the right to issue notes to be legal tender for the payment of public and private debt. Legal-tender notes are treasury notes or banknotes that, in the eyes of the law, must be accepted in the payment of debts.”[43] The ruling in the Legal Tender Cases (which include Juilliard v. Greenman) led later courts to “support the federal government’s invalidation of gold clauses in private contracts in the 1930s.”[44]

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 proffered as payment. The 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

Contrary to common misconception,[45] there is no federal law stating that a private business, a person, or a government organization must accept currency or coins for payment. Private businesses are free to create their own policies on whether they accept cash, unless there is a specific state law which says otherwise. For example, a bus line may prohibit payment of fares in cents or dollar bills. In addition, movie theaters, convenience stores, and gas stations may refuse to accept large denomination currency as a matter of policy or safety.[3][4]

The principal purpose of that statute is to ensure the nationwide acceptance of U.S. currency, consistent with constitutional language that reserves to Congress the power to create a uniform currency that holds the same value throughout the United States. While the statute provides that U.S. money is legal tender that may be accepted for the payment of debts, it does not require acceptance of cash payments, nor does it provide that restrictions cannot be imposed upon the acceptance of cash.[46]

Source: Legal tender, (last visited Nov. 29, 2020).

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