RogerBW's Blog

Nonsense about Legal Tender 28 October 2017

Even I (not the person most exposed to news media) heard Dire Warnings recently about original pound coins ceasing to be legal tender on 15 October.

The clear implication, and sometimes the overt statement, was "spend them now", and here's an example from my local post office.

But these are two separate statements that have no particular relationship to each other.

(Disclaimer: I'm not a lawyer, I'm just one of the very few people who thinks you should be able to know what the law is, and works for an organisation that makes it freely available to you. Further disclaimer: my employer has nothing to do with this post.)

Legal tender is a precise legal concept which has only a tangential relationship to whether a coin is spendable. It's not even for settlement of debts between individuals, though that's a common simplification of the situation. If I owe you money, you sue me for it, and I offer the court that amount in legal tender, the court is obliged to accept it in settlement of my debt, rather than (e.g.) taking whatever it was that secured the debt. If it's not legal tender, it's up to the court whether they choose to accept it. And if it doesn't involve a court but is a transaction directly between us, then it's simply a matter for mutual agreement. (In practice if you refuse to accept legal tender in settlement of a debt and choose to sue instead the court is unlikely to look kindly on you.)

This mostly protects the debtor (who knows that a particular thing must be accepted). There are also limits on amounts of coinage: if I offer the court a sack of 2p pieces, they don't have to haul them away and count them, they can simply say "that's not legal tender, we don't accept it, go away and come back with something sensible". (Pound coins and larger are legal tender for any amount, though, so you can still get fairly silly if the sum is large.)

But for example Sterling notes issued by Scottish banks are not legal tender, not only in England but in Scotland: they are universally accepted, but in a legal sense that's by agreement between the parties rather than as a requirement of law. (Similarly with Northern Ireland.)

Here's a place where legal tender blatantly doesn't apply, though: shopping. If I pick up a thing in a shop and take it to the till, there's no debt involved: the shop (by putting a price label on something) has issued an invitation to treat. I say, in legal effect, "I will give you these shiny metal discs in return for that thing", the shopkeeper agrees, and the contract of sale is made. There's never a debt, so legal tender is not relevant. But the shopkeeper can choose to decline my offer.

This is why vending machines don't need to accept all notes and coins; and why shops can refuse large bills, or even refuse to take cash at all, or (as in the case of Tesco in the UK) refuse to accept old-style pound coins some weeks before they ceased to be legal tender. (It's also why a price in an advertisement isn't binding.)

So to get back to the sign in the post office, what matters is whether the post office or other shops will still accept old pound coins, which is not being stated – though in practice they now won't. The coins can still be changed at banks, so they're not losing their value; it's just more inconvenient to realise it. (And quite a few vending machines still don't accept new pound coins, and probably won't be updated for months.)

Of course, getting people to spend more makes the economy look better, briefly. There have been over 2,000,000,000 old pound coins circulated overall, and there were 300,000,000 new ones in the initial minting, so even a small chunk of that being suddenly spent might make a noticeable blip.

  1. Posted by Owen Smith at 01:55am on 29 October 2017

    The annoying thing from my point of view is shops kept giving me old round pound coins as change until only days before the end. There were news reports of shops and business associations complaining about the short changeover period. Short? It was six months! The problem is most of them did absolutely nothing about it for the first four or five months of the changeover.

    I agree with you that the law should be understandable. Unfortunately it appears parliament has not agreed with that for at least a couple of decades.

  2. Posted by RogerBW at 04:24pm on 31 October 2017

    My understanding is that, without the organisation I work for, it wouldn't even be possible to read the law in the UK without paying over £10,000 a year or being involved with an institution that does.

    (Bear in mind that "the law in the UK" includes court judgments as well as legislation. And is great, but it didn't exist until several years after we'd shown it could be done.)

  3. Posted by Vivienne Dunstan at 09:59pm on 31 October 2017

    Scottish notes are not universally accepted by English shops. I've had them refused in Dorset, and there are frequent reports still nowadays in the Scottish media of other Scots encountering this.

    It's rarely a problem near the Border, so eg in Carlisle or Newcastle. But further south it can be very inconvenient.

  4. Posted by RogerBW at 07:21am on 01 November 2017

    Fair point; what I was mostly getting at is that English notes can be refused in English shops too, even though they are legal tender, and Scottish notes are accepted in Scottish shops even though they aren't.

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