Legal tender

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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.[citation needed] 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.[clarification needed]

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.

Under U.S. federal law, cash in U.S. dollars is a valid and legal offer of payment for antecedent debts when tendered to a creditor. By contrast, federal statutes do not require a seller to accept federal currency or coins as payment for goods or services simultaneously exchanged. Therefore, private businesses may formulate their own policies on whether to accept cash unless state law requires otherwise.[3][4]


The term "legal tender" is from Middle French tendre (verb form), meaning to offer. The Latin root is tendere (to stretch out), and the sense of tender as an offer is related to the etymology of the English word "extend" (to hold outward).[5]

Withdrawal and replacement[edit]


Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency: The current form or forms of money is or are pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country completely replaces the old currency with new currency.



  • During Nazi occupation of Netherlands, 500 & 1000 guilders were demonetized, and after liberation 100 guilder was also demonetized. Anne Frank in her diary entry on March 19, 1943 notes:[7][8][9]

    Thousand-guilder notes are being declared invalid. That'll be a blow to the black marketeers and others like them, but even more to people in hiding and anyone else with money that can't be accounted for. To turn in a thousand-guilder bill, you have to be able to state how you came by it and provide proof. They can still be used to pay taxes, but only until next week. The five-hundred notes will lapse at the same time. Gies & Co. still had some unaccounted-for thousand-guilder bills, which they used to pay their estimated taxes for the coming years, so everything seems to be above board.

    Piet Lieftinck's measure of demonetizing 100 guilder was aimed at war profiteers.[9]
  • On October 6, 1944, 100 franc was demonetized. People having 100 francs were allowed to exchange up to 2000 francs per household for new banknotes. Banks added withdrawal limits and checking accounts were frozen.[9]
  • Currencies used in the Eurozone which were replaced by the euro were then not legal tender, but all banknotes were redeemable for euros for a minimum of 10 years (for certain notes, there is no time limit).[citation needed]
  • India demonetised its 500 and 1000 rupee notes on 8 November 2016. This action affected 86 percent of all cash in circulation. The demonetisation action was intended to curb Counterfeit Notes and black money, the hoarding of unaccounted cash, and sponsorship of terrorism, but also led to long queues from bank runs, leaving more than 30 people dead.[10] The old notes are now being replaced by new 500 and 2000 rupee notes.






Withdrawal from circulation[edit]


Cashless society[edit]

A cashless society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.[11] Cashless societies have existed, based on barter and other methods of exchange, and cashless transactions have also become possible using digital currencies such as bitcoin.

Commemorative issues[edit]


Status by country[edit]


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:

  • 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]


Australia Post prohibits the sending of coins or banknotes, of any country, except via registered post.[17]





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.





Euro coins and banknotes became legal tender in most countries of the Eurozone on 1 January 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. 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 rounded to whole multiples of 5 cent), 1 cent and 2 cent coins from other eurozone countries remain legal tender in those countries.

Council Regulation (EC) No 974/98 limits the number of coins that can be offered for payment to fifty.[24] Governments that issue the coins must establish the euro as the only legal tender. Due to variations on the legislative meaning of legal tender in various member states and the ability of contract law to overrule the status of legal tender, it is possible for merchants to choose to refuse to accept euro banknotes and coins within specific countries within the Eurozone (the Netherlands, Germany, Finland and Ireland).[25] National laws may also impose restrictions as to maximal amounts that can be settled by coins or notes.



Republic of Ireland[edit]




Republic of India[edit]


The Indian rupee used to be an official currency of several other countries, including the Straits Settlements (now Singapore and parts of Malaysia), Iraq, Kuwait, Bahrain, Qatar, the Trucial States (now the UAE), Oman, Aden Colony and Aden Protectorate (now parts of Yemen), British Somaliland, British East Africa, and Zanzibar.







On 8 November 2016, Prime Minister Narendra Modi announced that existing INR 500 and INR 1000 banknotes would no longer be accepted as legal tender with a view to curb counterfeiting, tax evasion and the parallel economy.[27] The Reserve Bank of India outlined a scheme for holders of such banknotes to either deposit them into their bank accounts for full, unlimited value, or to exchange the banknotes for new, subject to a cap.[28]

New Zealand[edit]

New Zealand has a complex history of legal tender. English law applied, as applicable to local circumstances, either from 6 January 1840 (when the Governor of New South Wales by proclamation annexed New Zealand) or from 14 January 1840 (when Captain Hobson (of the Royal Navy) was sworn in as Lieutenant-Governor of New Zealand). The English Laws Act 1858 subsequently confirmed that English legislation passed prior to 14 January 1840 was and had been the law of New Zealand, as applicable to local circumstances. The (UK) Coinage Act 1816 therefore applied and British coins were confirmed as legal tender in New Zealand. (Unusually, until 1989, the Reserve Bank (established in 1934) 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 in New Zealand was considerably more complex. In 1840 the Union Bank of Australia started issuing bank notes under provisions of British law, but these were not automatically legal tender.

In 1844 ordinances were passed[by whom?] making the Union Bank banknotes legal tender and authorizing 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 amongst the settler population. In 1845 the British Colonial office disallowed the Ordinance[which?] and the debentures were recalled, not without first causing a panic among holders.

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 authorized 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, the Bank of New South Wales, the National Bank of New Zealand and the Colonial Bank of New Zealand were created by Acts of Parliament and authorized to issue bank-notes backed by gold, however these notes were not legal tender.


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


In 1964 the Reserve Bank of New Zealand Act re-stated 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-dollar 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, introduced in 1967.

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 older-style 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 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 currently 1, 5, 10 and 20 NOK denominations are in common circulation).

Singapore and Brunei[edit]


Switzerland and Liechtenstein[edit]






The New Taiwan dollar issued by the Central Bank of the Republic of China (Taiwan) is legal tender for all payments within the territory of the Republic of China, Taiwan.[33] However, since 2007,[34] candidates to become civil servants in elections in the Republic of China may no longer pay any deposit in coinage.[35]





later changed in 1928 to be in line with The Currency Act, B.E. 2471[36] to




United Kingdom[edit]



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]



In a 1976 case, Miliangos v George Frank Ltd, the House of Lords established that the English courts could order debts to be paid in currencies other than sterling under certain circumstances, overturning two centuries of precedent.


No banknotes are legal tender in Scotland.[42] Scottish banknotes are legal currency, however are not legal tender anywhere in the UK.[43]

United States[edit]












See also[edit]


  1. ^ "Legal Tender Guidelines". The Royal Mint. Retrieved 9 April 2020.
  7. ^ Frank, Anne, 1929-1945. (2003). The diary of Anne Frank. Barnouw, David,, Stroom, Gerrold van der,, Paape, A. H. (Abraham Harry), 1925-2001,, Hardy, H. J. J.,, Pomerans, Arnold,, Mooyaart-Doubleday, B. M. (The revised critical ed.). New York. ISBN 0-385-50847-6. OCLC 51866807.CS1 maint: multiple names: authors list (link)
  8. ^ "Anne Frank The Diary Of A Young Girl : Free Download, Borrow, and Streaming". Internet Archive. Retrieved 26 August 2020.
  9. ^ a b c Paying for Hitler's war : the consequences of Nazi hegemony for Europe. Scherner, Jonas,, White, Eugene Nelson, 1952-. New York, NY. 21 March 2016. ISBN 978-1-107-04970-3. OCLC 936255867.CS1 maint: others (link)
  11. ^ "THE COST OF CASH IN THE UNITED STATES" (PDF). The Fletcher School Tufts University. p. 9. Archived from the original (PDF) on 1 December 2016. Retrieved 17 December 2016.
  12. ^ Reserve Bank Act 1959, s.36(1)
  13. ^ Currency Act 1965, s.16
  14. ^ CURRENCY ACT 1965 Archived 12 March 2011 at the Wayback Machine
  20. ^ Reserve Bank Act 1959, s.43, 44
  28. ^ "Archived copy" (PDF). Archived (PDF) from the original on 9 November 2016. Retrieved 9 November 2016.CS1 maint: archived copy as title (link)
  31. ^ "Currency Interchangeability Agreement – Brunei Notes and Coins". Monetary Authority of Singapore. Archived from the original on 27 July 2014. Retrieved 24 November 2014.
  35. ^ Article 32 of the Civil Servants Election And Recall Act.
  40. ^
  42. ^ "What is legal tender?". Retrieved 1 December 2020.
  43. ^ CSCB. "Legal Position". Retrieved 1 December 2020.

External links[edit]