Legal Definitions - lawful money

Lawful money refers to any form of currency that a government has officially declared to be legal tender within its jurisdiction. This means it is recognized by law as a valid and acceptable medium for settling all public and private debts. Creditors are legally required to accept lawful money as payment for debts.

Here are some examples to illustrate this concept:

• Example 1: Paying for a Meal
  Imagine you are at a restaurant in New York City and your bill comes to $50. You pay with five $10 bills issued by the U.S. Treasury. The restaurant owner must accept these bills because U.S. dollars are designated as lawful money (legal tender) in the United States. They cannot refuse your payment and demand, for instance, payment in gold coins or a foreign currency, as long as you are offering the legally recognized currency for the debt.

• Example 2: Settling a Loan
  A small business owner takes out a loan from a bank, agreeing to repay it in Canadian dollars. When it's time to make a payment, the owner transfers funds from their business account, which holds Canadian dollars, to the bank. The bank is legally obligated to accept this payment because Canadian dollars are lawful money in Canada, and the loan agreement specified payment in that currency. If the business owner attempted to pay with Mexican pesos, the bank could refuse, as pesos are not lawful money for debts denominated in Canadian dollars within Canada.

• Example 3: Government Taxes
  A citizen files their annual income tax return and owes the government a certain amount. They make an electronic payment directly from their bank account, which holds euros. The tax authority in their European Union country accepts this payment because euros are the lawful money (legal tender) within that member state. The government would not accept payment in rare stamps or cryptocurrency, as these are not recognized as lawful money for tax obligations.