ON PAYMENTS IN PENNIES

No, there is no law that says a merchant must take any particular kind of currency, said Michael White, spokesman for the U.S. Mint. Businesses are free to set their own guidelines as to what they accept as payment, he said.

Theres an amplification on the Treasury Departments web site. They ask the question a different way, but point to the same answers. ON the web site, the party says 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?

Responding, Treasury says 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."

They go on to explain that 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.

Summarizing its position, Treasury goes on to say that 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. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

Actually, the citations to federal statutory sources are correct, and so are the examples cited because they are examples of real-life cases that have been decided for the propositions stated. But they ignore the history of what legal tender means, what in fact legal tender really means, and why laws about them were created in the first place.

There are two constitutional issues that are useful to discuss what the words mean. First, is Article I, Section 8 of the Constitution, which provides "The Congress shall have Power ... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures...."

Next is from Article I, section 10, which reads, "No state shall ... coin Money' emit bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts...." Courts have consistently held that neither of these provisions of the Constitution renders the country's current money system unconstitutional, staring with the Legal Tender Cases in 1884.

Those cases involved the ultimate political gamble: creation of paper currency at the height of the Civil War, designed to fund the effort. Its inventor: Salmon P. Chase, Secretary of the Treasury. When accomplished, the federal government reportedly had three days in funding in its vaults; thereafter, it printed what it needed.

Legal tender ultimately is the power of compulsion. It means that the government can require you, willingly or not, to accept a type of money that is tendered. Thats why state-authorized private banknotes were an ultimate failure and sold at discounted prices that were disparate.

Over the years, there have been many challenges to what legal tender means; few recall that prior to 1857, foreign coins circulated freely in the United States. The act of Feb. 21, 1857, (ch. 56, 11 Stat. 163 ) determined that the legal tender of the Spanish pillar dollar continued but for other foreign coins, legal tender status was denied.