Legal Tender Cases

The Legal Tender Cases were two 1871 United States Supreme Court cases that affirmed the constitutionality of paper money. The two cases were Knox v. Lee and Parker v. Davis.

The U.S. federal government had issued paper money known as United States Notes during the American Civil War, pursuant to the terms of the Legal Tender Act of 1861. In the 1869 case of Hepburn v. Griswold, the Court had held that the Legal Tender Act violated the due process clause of the Fifth Amendment to the United States Constitution. In his majority opinion, Chief Justice Salmon P. Chase did not hold that Congress lacked the power to issue paper money, but rather ruled that the notes could not be used as legal tender for pre-existing debts. The Supreme Court overruled Hepburn v. Griswold in the Legal Tender Cases, holding that United States Notes could be used to re-pay pre-existing debts.

Legal Tender Act of 1862Edit


The Legal Tender Cases primarily involved the constitutionality of the Legal Tender Act of 1862, 12 Stat. 345, enacted during the American Civil War.[1] The Act authorized issuance of paper money, United States Notes, to finance the war without raising taxes.[2] The paper money depreciated in terms of gold and became the subject of controversy, particularly because debts contracted earlier could be paid in this cheaper currency.[3]

Chief Justice Chase described the sequence of events:

Now, then, let it be considered what has actually been done in the provision of a National currency. In July and August, 1861, and February, 1862, the issue of sixty millions of dollars in United States notes, payable on demand, was authorized. They were made receivable in payments, but were not declared a legal tender until March, 1862, when the amount in circulation had been greatly reduced by receipt and cancellation. In 1862 and 1863 the issue of four hundred and fifty millions in United States notes, payable not on demand, but, in effect, at the convenience of the government, was authorized, subject to certain restrictions as to fifty millions. These notes were made receivable for the bonds of the National loans, for all debts due to or from the United States, except duties on imports and interest on the public debt, and were also declared a legal tender. In March, 1863, the issue of notes for parts of a dollar was authorized to an amount not exceeding fifty millions of dollars. These notes were not declared a legal tender, but were made redeemable under regulations to be prescribed by the Secretary of the Treasury. In February, 1863, the issue of three hundred millions of dollars in notes of the National banking associations was authorized. These notes were made receivable to the same extent as United States notes, and provision was made to secure their redemption, but they were not made a legal tender.[4]

Hepburn v. GriswoldEdit

In Hepburn, Chief Justice Salmon P. Chase held for a 5–3 majority[5] of the Court that the Act was an unconstitutional violation of the due process clause of the Fifth Amendment:


We are obliged to conclude that an act making mere promises to pay dollars a legal tender in payment of debts previously contracted, is not a means appropriate, plainly adapted, really calculated to carry into effect any express power vested in Congress; that such an act is inconsistent with the spirit of the Constitution; and that it is prohibited by the Constitution.[7]


Knox v. Lee and Parker v. DavisEdit

Justices Bradley and Strong subsequently voted to reverse the Hepburn decision, in Knox v. Lee and Parker v. Davis, by votes of 5–4.[9]

Juilliard v. GreenmanEdit

The constitutionality of the Act was more broadly upheld thirteen years later in Juilliard v. Greenman.[10]

Background about constitutionality of paper moneyEdit


The federal government first issued paper money in 1861 to fund the Civil War.[11] Before that, all U.S. paper money was bank-issued money. For example, paper notes were issued by the First Bank of the United States, which was a private corporation chartered by the federal government.[12] Congress had also authorized paper money (e.g. Continentals) even before the Constitution was adopted. The Continental was issued by both the individual states and the Continental Congress under the Articles of Confederation. Those Articles specifically allowed the issuance of legal tender paper money, at the time called "bills of credit."[13]

In Hepburn, Chief Justice Chase noted, "No one questions the general constitutionality, and not very many, perhaps, the general expediency of the legislation by which a note currency has been authorized in recent years. The doubt is as to the power to declare a particular class of these notes to be a legal tender in payment of pre-existing debts."[14]

Original intent and original meaningEdit




See alsoEdit


  3. ^ Legal Tender cases, The Columbia Encyclopedia, Sixth Edition. 2001–05.
  4. ^ Hepburn v. Griswold, 75 U.S. 603, 618–19 (1869).
  5. ^ Sachs, Leon. 1933. "Stare Decisis and the Legal Tender Cases." Virginia Law Review 20: 864–65
  6. ^ Hepburn, 75 U.S. at 624.
  7. ^ Hepburn, 75 U.S. at 625.
  8. ^ Pusey, Merlo. Matter of Delicacy: The Court Copes With Disability Archived 2007-07-13 at the Wayback Machine, Supreme Court Historical Society 1979 Yearbook.
  9. ^ Knox v. Lee, 79 U.S. 457 (1871).
  10. ^ Juilliard v. Greenman, 110 U.S. 421 (1884).
  14. ^ Hepburn, 75 U.S. at 619.
  16. ^ Paulsen, Michael Stokes. "How to Interpret the Constitution (and How Not To) Archived 2007-06-09 at the Wayback Machine," 115 Yale Law Journal 2037, 2061 n. 46 (2006).
  17. ^ The Debates in the Federal Convention of 1787 Archived 2007-02-10 at the Wayback Machine, ed. Madison, James (1787-08-16). Retrieved 2007-02-24. One delegate at the Constitutional Convention went so far as to say that an express power to emit paper money would be "as alarming as the mark of the Beast in Revelation".
  18. ^ Siegan, Bernard.. The Supreme Court's Constitution, (1987), page 36: "The central government would be able to emit promissory paper 'as it will be necessary or safe' pursuant to the borrowing power."
  19. ^ Siegan, Bernard. The Supreme Court's Constitution, (1987), page 27: "Because the power was not banned, Congress could print paper money and designate it legal tender under its necessary and proper power (article I, section 8, clause 18) once the required relationship to an enumerated power had been established."
  21. ^ Madison, James. Federalist #44 (January 25, 1788).

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