Posts Tagged ‘debts’

Edwin VieiraDr. Edwin Vieira, who is touted in the libertarian community as a constitutional authority on money and is a holder of four degrees — including a PhD and JD from Harvard — should know better about what the U.S. Constitution says about legal tender.

In his 2011 presentation, “What is Constitutional Money?,” he says, in reference to Article 1, Section 10, clause 1 of the Constitution regarding the States (at 13:57):

There’s a reserve power and actually a duty to make gold and silver coin a tender in payment of debts.

That clause says that no State shall “make any Thing but gold and silver Coin a Tender in Payment of Debts.”

From the context of the entire clause, it is clear that it is saying what is prohibited to the States. Therefore, to say that they shall not make anything but gold and silver coin a tender in payment of debts is to say that if they choose to exercise their power of enacting legal tender laws, then they are required to make only gold and silver coins a tender in payment of debts.

The same clause allows restricts the States from imposing duties on imports and exports, unless they have the permission of Congress. Therefore, if they do have such permission, then they can do what is permitted, and in the case of legal tender laws, they are permitted to enact them, and then and only then are they required to make gold and silver coin a tender in payment of debts.

I give a further analysis of this clause in my article, The U.S. Constitution doesn’t say money should be gold or silver coin.

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$5 George Washington 200th anniversary of deat...

From the U.S. Treasury Department’s legal tender FAQ (emphasis mine):

I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn’t this illegal?

The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled “Legal tender,” which states: “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.”

This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.

One consequence of this distinction is that the U.S. Constitution’s clause stating that no State shall “make any Thing but gold and silver Coin a Tender in Payment of Debts” shows that it is only referring to the constitutional authority of the States to make gold and silver coins legal tender for payment of public and private debts, and doesn’t force private businesses and individuals to accept them as payment for goods and services.

I demonstrated earlier how that clause doesn’t require the States to implement legal tender laws, but if they do, then they are mandated under the Constitution to make only gold and silver coins legal tender in payment of public and private debts, but not for payment of goods and services.

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Today, I was reminded of how my local gym didn’t accept cash as a form of payment as early as 2007. It reminded me of legal tender laws, and how I had been led to believe that cash was always accepted as a form of payment, but checking into that proved otherwise.

According to the Merriam-Webster Online Dictionary, legal tender is “money that is legally valid for the payment of debts and that must be accepted for that purpose when offered.”

But the payment in question isn’t for a debt, but for a service, and that is how they can legally refuse cash as payment. As a taxi driver once informed me, it’s only if you agree to let the person come back and pay you later, that it becomes a debt. Then, they can pay you cash, without you being able to legally refuse it.

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