§ 178. “Legal Tender.”

DEFINITION.—Legal tender is the act of tending, in the performance of a contract, or in satisfaction of a claim, that which the law prescribes or permits, and at such time and place as the law prescribes or permits. (Webster's Internat Dict.) In the United Kingdom all coin current under proclamation, whether British, foreign, or colonial, is legal tender. British gold coin is legal tender for any amount, unless defaced or deficient in weight; British silver up to forty shillings, and British bronze up to a shilling. (Coinage Act, 1870 [33 and 34 Vic. c. 10] s. 4.) Bank of England notes are legal tender in England for all sums above £5, except by the Bank itself and its branches. (Bank of England Act, 1833 [3 and 4 Wm. IV. c. 98, s. 6].) The notes are treated as cash and not as securities for money, and they pass by mere delivery. (Miller v. Race [1758] 1 Burr. 452.) The notes of a county bank are good tender, if not objected to at the time of tender. (Polglass v. Oliver [1831] 2 Crompt. and Jarv. 15.) In Australasia and New Zealand, by an Order in Council of 1896, it is provided that the rules as to the amount for which British coin is legal tender are the same as in the United Kingdom. (Imperial Statutory Rules and Orders, 1896.)

COINAGE AND LEGAL TENDER.—By section 114 the States are forbidden to coin any money or to make anything but gold and silver coin a legal tender in payment of debts. The prohibition is similar to Art. I. sec. 10, subs. 1 of the United States Constitution. Hence it appears that under both Constitutions the creation and regulation of the monetary system is a power conferred on the Federal Parliament. It is a general power; the Parliament is not limited in the choice of metals to which it will give the quality of money. It may choose some other metal than gold and silver, and impress upon it a legal tender quality. But if a State endeavoured to compel a person to accept anything but gold or silver as a legal tender, the person aggrieved could appeal to the Courts of the Commonwealth for relief. (Burgess, Political Sci. II. p. 143.)

LEGAL TENDER IN THE UNITED STATES.—The Congress of the United States is expressly empowered to create and regulate the value of metal money. It has, however, been decided by the Supreme Court that, although the power to legislate concerning legal tender and paper money is not expressly conferred upon Congress, yet it has, by necessary intendment, such a power, and it can make anything a legal tender in payment of debt. (Juilliard v. Greenman, 110 U.S. 421.) The legal tender cases are very instructive, as illustrating the expansive and elastic capacity of a written constitution and the possibilities of its inherent and necessary powers. This subject will be referred to more fully in our note on “Paper Money,” infra. At the present stage abstracts of the ruling cases are given.

In the Constitution of the United States there is no express grant of power to Congress to declare what shall be a legal tender, but this power has been uniformly exercised and unquestioned. This universal recognition is tantamount to a direct constitutional declaration, and the power can now be considered settled. (Martin v. Hunter's Lessee, 1 Wheat. 304; Cohens v. Virginia, 6 Wheat. 421; Briscoe v. Bank of Kentucky, 11 Pet. 257; Anderson v. Dunn, 6 Wheat. 204. Baker, Annot. Const. p. 46.)

A Federal law making United States treasury notes legal tender is, when applied to contracts in existence prior thereto, unconstitutional. (Willard v. Tayloe, 8 Wall. 557; Hepburn v. Griswold, 8 Wall. 603; Broderick v. Magraw, 8 Wall. 639.) The decisions in the above cases are overruled, and the acts of Congress making United States treasury notes legal tender are held to be valid when applied to antecedent, as well as to subsequent contracts. (Legal Tender Cases [1871] 12 Wall. 457; Dooley v. Smith, 13 Wall. 604; Norwich Railroad v. Johnson, 15 Wall. 195; Juilliard v. Greenman, [1884] 110 U.S. 421. Baker, Annot. Const. p. 46.)

IMPERIAL CONTROL.—Australian governors are at present required by their instructions not to assent to any Bill affecting the currency of the colony, unless such bill contains a clause suspending its operation until the signification of the Queen's pleasure thereon, or unless there is urgent necessity requiring it to be brought into immediate operation. In either of these cases he is authorized to assent to the bill, and remit it

  ― 576 ―
to the Queen at the earliest opportunity (p. 399, supra). This paragraph was omitted from the Draft instructions under the Sign Manual and Signet to the Governor-General of Canada, dated 5th October, 1878, and in all probability it will not be found in the instructions to the Governor-General of the Commonwealth.

In 1851 a Canadian Act in relation to coinage was disallowed by the Queen in Council, on the grounds (1) that the Act proposed to confer upon the Governor-General the right of coining—a prerogative reserved by constitutional law to the sovereign; (2) that it purported to alter the current rates of certain foreign coins—a provision which, being enacted without the previous assent of Her Majesty in Council, was an interference with Imperial control over the value of currency money in circulation throughout the realm. By the British North America Act of 1867, the Imperial Parliament has specially empowered the Parliament of Canada to exercise “exclusive legislative authority” in relation to “currency and coinage.” The Acts passed in Canada upon the subject of the currency in 1868 and in 1871 expressly conserve the prerogative of the Crown in the matter of coinage, and authorize Her Majesty to fix by proclamation from time to time the rates at which coins in circulation in Canada, or struck off by order of Her Majesty for use in Canada, shall pass current. (Todd's Parl. Gov. in Col. 2nd ed. p. 176.)

“In 1866 a ministerial crisis occurred in Queensland. Owing to serious financial embarrassments in that colony, ministers had tendered to the governor (Sir G. F. Bowen) their advice that, in order to sustain the public credit, there should be an immediate issue of inconvertible paper currency, in the shape of legal tender notes, to an amount not exceeding £200,000. The governor demurred to this proposal, inasmuch as he was expressly forbidden, by the royal instructions—‘which are a part of the constitutional law of the colony’—to assent to any bill of this nature, unless upon urgent necessity, as aforesaid. He distinctly declared that in no event would he give the royal assent to any such bill. He suggested, however, another mode of meeting the financial difficulty—viz., by obtaining legislative sanction to the issue of treasury bills, coupled with the imposition of additional taxation; a course which had proved successful, under similar circumstances, in other colonies, and in the mother country.” (Todd's Parl. Gov. in Col. 2nd ed. p. 185.)

51. (xiii.) Banking179, other than State banking180; also State banking extending beyond the limits of the State concerned181, the incorporation of banks182, and the issue of paper money183:

HISTORICAL NOTE.—Sec. 91 of the British North America Act specifies “Banking, incorporation of banks, and the issue of paper money” (sub-s. 20). These words were adopted in the Commonwealth Bill of 1891. In committee, the question of State savings banks was raised, but no amendment was moved. (Conv. Deb., Syd., 1891, pp. 684–5.) At the Adelaide session, 1897, the same words were used. The question of State banks was again mentioned, but no amendment was moved. (Conv. Deb., Adel., pp. 778–9.) At the Sydney session, a suggestion by the Legislative Assembly of New South Wales and the Legislative Council of Tasmania, to insert after “banking” the words “excluding State banking not extending beyond the limits of the State concerned,” was agreed to (Conv. Deb., Syd., 1897, pp. 1074–5), and the sub-section was verbally amended.