Legal tender

Legal tender or forced tender is payment that cannot be refused in settlement of a debt by virtue of law.

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Legal tender is a concept that is so frequently misunderstood: this is often a result of differing legal definitions in different jurisdictions. Cheques, credit cards, debit cards and similar non-currency methods of payment are not generally defined as legal tender. Some jurisdictions may forbid by law, or otherwise restrict, payment other than by legal tender (for example, by outlawing the use of foreign coins and banknotes, or by requiring a licence to perform financial transactions in a foreign currency).

Related Topics:
Jurisdiction - Cheque - Credit card - Debit card - Banknote

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As legal tender can be refused until a person is in debt, vending machines and transport staff do not have to accept the largest denomination of banknote for a single bus fare or bar of chocolate, and even shopkeepers can reject large banknotes. However, restaurants that do not collect money until after a meal is served would have to accept any legal tender, though they would not be obliged to provide change – the restaurant is not in debt, it has been given a gift.

Related Topics:
Vending machine - Restaurant

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The right of a trader to refuse to do business with any person means a purchaser cannot demand to make a purchase, and so declaring a legal tender other than for debts would be redundant. (Some jurisdictions however restrict this right, for instance prohibiting discrimination on grounds of race or other criteria, or may prohibit the advertisement of a sale if this sale is not available.)

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