Objective Legal Tender Laws

It is for the courts that the legislature defines “legal tender.” If the legislature did not define legal tender, there would be no way to know when a debt has been discharged, or when payment has been made. All governments create a plethora of medals, medallions, certificates, promises, and warrants that may be valuable, negotiable, even fungible, but are not recognized in courts of law as legal tender. That is why a government must define the term in order for objective law to be possible. Moreover, in the USA until 1857, several types of foreign coins were commonly recognized by law as being “legal tender.” The Spanish Dollar was the foundation of commerce, both for international and local trade. Bank notes from the early 19th century promised to pay fractions of a dollar, but displayed images of Spanish or Mexican coins. (See “Spanish Coins on American Notes” here: http://exhibits.oldnote.org/exhibits/show/scoan/about )

Gold. Shaped like a coin. Issued by Congress. Not legal tender.

More on my blog here:

https://necessaryfacts.blogspot.com/2017/01/what-is-legal-tender.html

In theory, you could agree on a non-objective form of payment, as long as you agree on it. The point here is that the government must define what is and is not a government instrument for the payment of debts, again, as it applies in courts of law. The purpose of courts is to settle conflicts. Both parties can bring all the goodwill they want, but if they did not have a serious disagreement in principle they would not be in front of an artbitrator in the first place. That is why the assertion that courts are not supposed to interpret the law is poorly grounded. If the law were unambiguous, people of goodwill would never have any disagreements, at least not contractual ones. And pretty much that is true. We do not spend our lives in courtrooms over every misunderstanding because we really can work them out on our own. But what happens if you promise to pay with a herd of sheep and your herd dies? What would be equitable? You could offer Congressional medals, deeds for federal land, or the right to use a certain radio frequency. And if the other party finds something to agree on, then there is no problem. When a problem remains, you end up in court and there is found the requirement for a definition of legal tender.

(Edited by Michael Marotta on 4/06, 5:35pm)

No, I am sorry, but we just do not agree. You and I have a problem and we do not agree. The sheep are dead. I am offering you 1000 bushels of apples. You don't want them. What do you want? 10,000 eggs. I don't have those and don't want get into the egg business. How about 400 lbs of copper bars? You say no. You want gold. Well, OK, maybe. How much?  You say 40 ounces. I say No, that's too much, I counter with 28. You say No, not enough. Back and forth, back and forth. If we cannot agree, you go without the sheep you paid for, which is fine with me. I tried being reasonable. You rejected all of my offers. You can pound salt for all I care. So, you sue me in a court of law with competent jurisdiction. Lacking any definition of legal tender, it is entirely up to the whim or wisdom of the bench. That is not objective law.

In a discussion with Henry Mark Holzer, Ayn Rand said that Roman law was objective. It definitely was not based on individual rights, but it was written down and posted for all to know and it was uniformly enforced. That made it objective. Maybe Ayn Rand was wrong about that. But if you so, you are going to have to make a case.

Right. Then it would be case in equity.

The framers of the Constitution granted the federal courts jurisdiction over both common-law actions and suits in equity. Equity was a centuries-old system of English jurisprudence in which judges based decisions on general principles of fairness in situations where rigid application of common-law rules would have brought about injustice. Judges exercised equitable jurisdiction based on a distinct set of procedures and remedies—most notably, without a jury—that allowed them greater flexibility to hear cases and resolve disputes. The exercise of equity jurisdiction periodically led to debate about the power and discretion of federal judges. -- 

https://www.fjc.gov/history/courts/jurisdiction-equity

 

Legal tender laws prevent every case from being one of equity.

In law, the term "equity" refers to a particular set of remedies and associated procedures involved with civil law. These equitable doctrines and procedures are distinguished from "legal" ones. While legal remedies typically involve monetary damages, equitable relief typically refers to injunctions, specific performance, or vacatur. A court will typically award equitable remedies when a legal remedy is insufficient or inadequate. For example, courts will typically award equitable relief for a claim which involves a particular or unique piece of real estate, or if the plaintiff requests specific performance. -- https://www.law.cornell.edu/wex/equity

 

If we look at the earlier posts based on my blog post, the government has to define in law which of its many putatively valuable creations are money. The Purple Heart, the Congressional Medal awarded to Lindbergh, deeds for the sale of federal land, etc., all look like money objects, but are not money as defined in law for the courts. Just for example, taking a lead from Ayn Rand's "Government Financing in a Free Society," which of the many instruments created by a government would be required to accept in payment for its services? (The easy historical case is: how can you pay your taxes? But we can leave taxation aside. The principle remains. Again, as Rand pointed out, government is the servant of the people, but not the unpaid servant.). 

What do you mean by "market value"?  I was at a coin show this weekend and silver is through the roof over spot. The US government sells a wide range of gold and silver coins for a wide range of prices. What is the market price of an ounce of gold? 

Not to put too fine a point on it, but we all harbor a lot of socialist ideas about money, trade, and commerce because we have been offered not much else in the way of theory. Ludwig von Mises and Karl Marx held to the same theory of historical development for money. The infamous anarcho-capitalist Murray Rothbard said that any bank that was not 100% backed in gold was engaging in fraud. (Leave aside the problem of laws against fraud in his anarchy.) But F. A. Hayek suggested that in a truly free market, one bank could issue its money backed in a market basked of the paper money of other banks. It was just an example, not a proposal. He was only saying that we do not know now how a truly free market will operate in this area because we have not seen one. I believe that we have to clear aside some intellectual clutter from pershaps otherwise well-meaning advocates of the free market. 

(Edited by Michael Marotta on 4/27, 3:47pm)

Sam, those are prices for bullion, not for numismatic items where condition and rarity are factors. 

http://libertycoinservice.com/wp-content/uploads/quotes/daily_quotes.pdf

Silver is way up over spot. (Gold is closer right now.) Silver is the poor man's gold and people have been flocking to it to save whatever they can in anticipation of the inflation coming from the Covid bail-outs. But the point is that all market prices of all goods and services are constantly in flux over space and time. It is a leftover fallacy from collectivist thinking about markets that there is one price that you can look up in a newspaper. 

https://necessaryfacts.blogspot.com/2011/11/supplies-and-demands.html

So, yes, as Doug says, two people can agree on an exchange and if it falls through they can strike a new agreement. That could even be anticipated in the contract. But, ultimately, if it goes to court rather than arbitration, then there must be a legally-recognized standard of value.

If one of us insists that payment be in numismatic-value coins and the other insists that it be in bullion, that could throw it into the courts.

The more we provide for in the initial agreement, the better our chances of avoiding the courts.

If the courts must adjudicate what is worth what, they should use the most recent market value.  This may require clearly defining what is being valued.  If the quantity being valued is a particular weight, mass, or volume of "gold", with no further specifics, that should be taken to mean bullion.  If the quantity being valued is "Krugerrands", that means Krugerrands.  If the quantity being valued is a certain number of "gold coins", with no further specifics, someone has been sloppy and may have to take consequences for that sloppiness.