Legal Tender Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Legal Tender, written in plain English, along with examples of how it is used.

What is Legal Tender?

(n) Legal tender is the instrument issued, circulated and controlled by government or central bank of the country which is used as instrument for tendering money transactions by handing over the possession of the instrument.

History and Meaning of Legal Tender

Legal tender refers to the currency or coins that must be accepted by law to pay any debts or taxes in a given country. The term originated in England in the 17th century when gold coins were made the only legal tender authorized for payment of debts. The government used its power to regulate the monetary system and to dictate what could be used as currency. Today, many countries have legal tender laws, which ensures that all their currency is recognized and accepted by law.

Legal tender is usually backed by the government and accepted by businesses and individuals. In other words, legal tender is a type of payment that must be accepted as payment for a debt. It is a lawful form of payment that is recognized and guaranteed by the government.

Examples of Legal Tender

  • In the United States, legal tender includes Federal Reserve notes and coins.
  • In Canada, legal tender includes Canadian coins and banknotes issued by the Bank of Canada.
  • In the European Union, legal tender includes the euro.
  • In Japan, legal tender includes Japanese yen.

Legal Terms Similar to Legal Tender

  • Currency - refers to a system of money in general use in a country.
  • Fiat money - refers to currency that is not backed by a physical commodity or a precious metal, but rather by the government's promise to pay the holder of the currency.
  • Seigniorage - refers to the profits generated by a government by minting and distributing currency.