What is legal tender?
Saturday, March 5th, 2016 | Distractions
Legal tender is money, right? But what is illegal tender? If we have a term like ‘legal tender’, what does that mean, and what does it mean for things that are not legal tender? I was thinking about this on my walk home today. Luckily Wikipedia came to the rescue with a good write-up on the subject.
Legal tender is anything that can be used to settle a debt. If I owe Fred £10, I can give him a £10 note and the debt is paid. He cannot say “no, I only accept coins”, because a £10 is legal tender and therefore has to be accepted as payment of debt. The UK has some quite complex rules on it. For example a ten pence piece is legal tender, but only up to a certain value of £10. Someone is not obligated to accept a payment of £1,000 in 10p pieces. Guidelines are available from the Royal Mint.
Things get a little more complicated around the union. Notes issued by the bank of England are legal tender in England and Wales. Scottish bank notes however, are not. In fact technically Scottish bank notes are not even legal tender in Scotland, though they are typically accepted to be by general agreement.
Another issue that comes into play is whether you have a debt, or whether you are treating. If you have not yet established a debt, the trader is under no legal obligation to accept your money. So a shop or a bus could refuse to accept a £20 note from you (many shops due refuse £50 notes) because no debt has yet come into play. However, if there was a debt established and then payment has requested, so as an invoice or a restaurant meal, they would then be obliged to accept your legal tender.
It is sometimes claimed that stamps are legal tender. This is not the case, and was confirmed by the Royal Mint.
Legal tender is money, right? But what is illegal tender? If we have a term like ‘legal tender’, what does that mean, and what does it mean for things that are not legal tender? I was thinking about this on my walk home today. Luckily Wikipedia came to the rescue with a good write-up on the subject.
Legal tender is anything that can be used to settle a debt. If I owe Fred £10, I can give him a £10 note and the debt is paid. He cannot say “no, I only accept coins”, because a £10 is legal tender and therefore has to be accepted as payment of debt. The UK has some quite complex rules on it. For example a ten pence piece is legal tender, but only up to a certain value of £10. Someone is not obligated to accept a payment of £1,000 in 10p pieces. Guidelines are available from the Royal Mint.
Things get a little more complicated around the union. Notes issued by the bank of England are legal tender in England and Wales. Scottish bank notes however, are not. In fact technically Scottish bank notes are not even legal tender in Scotland, though they are typically accepted to be by general agreement.
Another issue that comes into play is whether you have a debt, or whether you are treating. If you have not yet established a debt, the trader is under no legal obligation to accept your money. So a shop or a bus could refuse to accept a £20 note from you (many shops due refuse £50 notes) because no debt has yet come into play. However, if there was a debt established and then payment has requested, so as an invoice or a restaurant meal, they would then be obliged to accept your legal tender.
It is sometimes claimed that stamps are legal tender. This is not the case, and was confirmed by the Royal Mint.