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From: Peter Langston <psl>
Date: Mon, 17 Aug 98 17:42:53 -0700
Subject: Steenkin' cash
From: Jerry Leichter <firstname.lastname@example.org>
A lawyer friend of mine has been wanting to raise a ruckus somewhere about
places that refuse to accept cash for years. To the best of my
recollection, the details on the law go something like this:
1. Cash is legal tender for all debts: If I am obligated to pay you, and
tender cash, my obligation to you is at an end. If you refuse the cash,
that's your problem.
The law is fairly black and white on this issue, for reasons that go back
to its origin: Universal use of money printed by the US government only
goes back about a hundred years. Banks used to print their own "cash".
There were all sorts of problems with "exchange rates", frauds, banks going
out of business - so of course people would be reluctant to accept "cash"
except from banks they knew. The "legal tender" laws were put in place to
help commerce by ensuring that there was a standard way to pay debts which
would not be subject to the whims of the recipient.
2. There can certainly be agreements ahead of time that payment will be in
some form other than cash; or that cash will be in a restricted form (e.g.,
no bills over $50). There's a murky area as to exactly when and how a debt
is created, and what contract terms may apply, in the common situation where
a store offers things for sale, and then has a sign saying "no bills over
$50". Suppose I pick up an item and start to walk out of the store. I now
owe the store money. Can the store refuse to accept a $50? By being open
to the public, they are making an implicit offer to sell. By walking out
with the item, I've accepted their offer. So I now owe money - and they
must accept my payment in cash.
As far as I know, this has never been litigated - i.e., no one knows what
would really happen if someone pushed the argument to the limit.
3. There is an explicit limit on the use of small change. If I remember
correctly, pennies and nickels in an amount greater than $5 are not legal
4. Cash transactions above a certain limit have been reportable to the US
government for years. The limit has changed: It was $10,000 for a long
time. I think it was recently reduced to $5,000, but more generally the
regulations were made broader, so that any "suspicious" cash transactions
These reporting requirements apply only to financial institutions.
It is illegal to arrange one's affairs so as to avoid the reporting require-
ment - e.g., splitting a $10,000 cash deposit into two $5,000 cash deposits.
I don't know if it's only the financial institution that might be cited in
such a case; I believe it is. (Shawmut bank - then the second largest bank
in Massachusets, long since merged into the Fleet chain - was charged with
violations of this and related provisions. They released a response with
the fascinating defense saying, in effect, "There are *so* many bank
regulations, we can't really be expected to keep up." Sure.)
5. One measure the US has been employing to reduce illegal (and, in general
of course, all large) cash transactions for years has been to eliminate
large notes. There used to be $500 and $1000 notes; they're long gone.
The US $100 note is the world standard for cash transactions.
A couple of weeks back, the NY Times reported that there was concern about
the impact of the upcoming introduction of the Euro. The largest note will
be for 100 Euro's. I can't recall the exchange rate, but a Euro is worth
consider- ably more than a US dollar. Since the Euro will likely be as
stable as the US dollar, a 100 Euro note will have a significant advantage
over a US $100 bill: You'll need many fewer of them. There is enough cash
out there in the form of US $100 bills that a conversion to Euro's would
have a noticeable economic impact if the US, in effect, had to start "paying
(BTW, the cash market for US notes has already been disrupted by the change
to the new "more resistant" form. Despite US assurances that the old bills
will be honored indefinately, cash markets in much of the world believe the
US is just like their own country: New bills will be issued, and then the
old ones will be declared void. So old $100's trade at a considerable
discount in the black market.)
© 1998 Peter Langston