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(November 2011)

Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation.[1] Paper currency is a common form of legal tender in many countries. For instance, if an individual owes someone US$100 in the United States, he or she can try to pay the debt in Mexican Pesos or valuable jewelry or gold metal, or even a cheque or a charge card, but the creditor is not required to accept any of those as payment. The creditor must accept US $20 dollar bills, however, because that is legal tender in the United States. An individual can try to sell his or her pesos or gold to someone else in exchange for some US legal tender, and pay the debt with that money, but the creditor cannot force any specific person to satisfy a debt with pesos or gold. In Mexico, however, pesos are legal tender, and US dollars are not. So, by Mexican law, the creditor must accept pesos as payment, whereas the creditor can refuse US dollars or gold. The origin of the term "legal tender" is from Middle English tendren, French tendre (verb form), meaning to offer. The Latin root is tendere (to stretch out), and the sense of tender as an offer is related to the etymology of the English word extend (to hold outward).[2] The noun form of a tender as an offering is a back-formation of the noun from the verb.[citation needed] Legal tender is variously defined in different jurisdictions. Formally, it is anything which when offered in payment extinguishes the debt. Thus, personal cheques, credit cards, debit cards, and similar non-cash methods of payment are not usually legal tender. The law does not relieve the obligation until payment is accepted. Coins and notes are usually defined as legal tender. Some jurisdictions may forbid or restrict payment made other than by legal tender. For example, such a law might outlaw the use of foreign coins and bank notes, or require a license to perform financial transactions in a foreign currency. In some jurisdictions legal tender can be refused as payment if no debt exists prior to the time of payment (where the obligation to pay may arise at the same time as the offer of payment). For example vending machines and transport staff do not have to accept the largest denomination of banknote. Shopkeepers can reject large banknotes this is covered by the legal concept known as invitation to treat. However, restaurants that do not collect payment until after a meal is served would have to accept that legal tender for the debt incurred in purchasing the meal. The right, in many jurisdictions, of a trader to refuse to do business with any