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Dgcmagazine

Well...I'm no expert but...

I've always heard and read that US currency, FRN are good for all debts public and private. That is taxes of course and the payment of debt. If you are buying a product from another individual or paying for services, that is a private transaction, that is not payment of a debt. Anyone can pay another with anything (or any currency) the receiver in that case cannot demand US notes (FRNs) and the government cannot compel the buyer to pay with US notes. That transaction does not fall within the limits of the legal tender realm.

Mark
editor@ccmag.net
Community Currency Magazine

Quinn

Mark beat me to it. Is it really true that a British business is obliged to accept pounds sterling? I'd have thought they are free to refuse any transaction if they think it worthwhile.

(PS. There may be some nuance to this - if you advertise a product priced in pounds and then refuse to accept pounds then you could be open to an allegation of false advertising, for example - but as a basic rule I'd have thought that if a company wants to turn away your business then they are free to do so.)

aje

You are not obliged to use pounds sterling, but you are obliged to accept it. It's illegal to only accept payment in Euros.

That's my understanding.

Quinn

That's the point I'm querying. If a business is at liberty to refuse any transaction, surely they can, in effect, refuse to accept sterling if they so wish? Can a business really be forced to accept sterling when they can't be forced to sell you a good or service in the first place?

aje

Sorry, I see what you mean. Yes, I guess Marks and Spencer could refuse to serve all customers offering sterling and only those who offer to pay in Euros. But given that's illegal it's hard to see how they'd get away with it.

Quinn

My point is that I don't believe it would be illegal. If Marks and Spencer want to refuse to accept sterling, then there is nothing to stop them as they can refuse to enter into any transaction if they so wish (although it strikes me that it would be crazy business practice.)

Reading around the subject seems to support Mark's reading of the situation - at least with regard to the US and UK - in that legal tender laws apply to the payment of debt. So, a shopkeeper is fully entitled to refuse sterling if someone offers it in exchange for goods; it is only if he is owed money that he is obliged to accept payment in sterling if it is offered. I'm not entirely sure why, but I guess it could be designed to alleviate likely disputes (eg. you try to pay your debt but the lender insists you pay him in magic beans.)

If my understanding is correct then I suppose it means that a self-service petrol station that requests payment after filling up would be obliged to accept legal tender; but this could be avoided by requesting payment prior to dispensing the petrol.

Now, I may have misunderstood this completely, but if I haven't then it suggest that legal tender is, at the least, a much smaller issue that you have proposed. (I am also unsure what would happen if, prior to entering into a debt, you signed a contract stating that you would repay the debt in euros. If you then tried to repay in sterling, would legal tender laws triumph over breach of contract?)

aje

Ok, I'm with you now. According to the Royal Mint: Legal tender has a very narrow and technical meaning in the settlement of debts. It means that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation. Both parties are free to agree to accept any form of payment whether legal tender or otherwise according to their wishes. That seems pretty conclusive. I was right to start off with: I *am* wrong on legal tender(!)

Quinn

If only we'd thought to check with the Royal Mint in the first place. Perhaps that was too obvious, and we like a challenge!

David Hillary

But if you have a debt denominated in Euros, and you default on it, will the court award damages in Euros or Pounds?

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Adriano

It is quite clear from your dseircption of money printing that the government can never default on its debt. So any argument against rising government deficit must be based on inflation forecasts, not on default risk.

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