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Legal notion definition7/22/2023 ![]() For example, a clause in a “domestic” loan agreement in pounds sterling which indexed the amount to be repaid to the Swiss franc was sustained in the United Kingdom in Multiservice Bookbinding Ltd. However, under the floating exchange rate system coupled with the penetration of a philosophy in support of the freedom of capital transfers, commercial concerns realized that the protection of their transactional value is left to themselves in this unpredictable world of exchange rates. 547 (1926).Ĭhanges After the Floating Exchange Rate System 1007 and Die Deutsche Bank filiale Nurenburg v. 581 (C.A.) Re United Railways of Havana & Regla Warehouses Ltd., A.C. The home currency rule was particularly strong in common law countries, e.g., Manners v. For international cases where monetary obligations were expressed in foreign currencies, some countries even insisted that all monetary claims of foreign origin had to be asserted in domestic currency in court, while others prescribed that the obligor had an option to pay in domestic currency at the exchange rate on the day of payment. Since the national currency was closely linked to the national economy, the use of a foreign currency for domestic transactions, whether as a unit of payment or as a unit of account, was, as a matter of principle, incompatible with the role of the national currency. The monetary sovereignty was very strong. The legislative jurisdictional reach of a nation could be extended against an offender abroad regardless of the nationality of the offender (e.g., Japanese Criminal Code, art. In 1929, under the auspices of the League of Nations, the International Convention for the Suppression of Counterfeiting of Currency was adopted to cope with international counterfeiting bands (112 Treaty Series 372 (1931)). Supreme Court even assumed it to be an international obligation of sovereign states to enact penal provisions against counterfeiting and other crimes regarding foreign money ( United States v. Wherever committed, it was a challenge not only to the monetary sovereignty of a nation but also to the foundation of the international monetary order. 8(2)(b) of the Articles of Agreement of the International Monetary Fund prevailed.įorgery of national currency was a serious offense. dollars: in essence a philosophy similar to art. This resolution was broadly respected internationally for monetary obligations payable in U.S. dollars would be discharged by tendering the same amount in U.S. In 1933, the Congress of the United States adopted a joint resolution declaring that the gold clause was against public policy and that monetary obligations expressed in U.S. ![]() Thus, for example, the insertion of a gold clause in a contract, which indexed the amount to be paid to the amount of gold that was obtainable at the time of the accrual of the monetary obligation, was regarded as an unacceptable challenge to the governmental authority to gear the national economy. Regardless of a change in the purchasing power, the monetary obligation expressed in the domestic currency was discharged by tendering the same amount. The legal tender rule, therefore, accompanied the mandatory nominalism. Its monetary authority controlled the supply of credit and geared the economy to its maximum potential. The economic well-being of a nation rested in part on the stability of the currency which the nation maintained. ![]() Traditionally, monetary sovereignty was an important element of a nation’s sovereignty. However, the utility of the concept of legal tender may have to be reassessed because monetary obligations are now increasingly discharged by account settlement without any “tender” of currency. The state can also replace the currency by a new one and fix the conversion rate of the old currency in relation to the new as has been done recently in the European Union. Since the power is within the exclusive jurisdiction of the state issuing a particular currency, a monetary obligation expressed in that currency cannot escape from the reach of this regulation ( lex monetae). ![]() The Supreme Court of the United States considered the authority of determining legal tender as a component element of currency power (in the Legal Tender Cases, 79 U.S. This paper considers how confusing the role of national currency has become by examining how the legal tender, a traditional core concept of national currency, has lost its importance at present. Thus, the legal tender is a notion associated with the discharge of monetary obligation by “payment.” When the banknote of a currency is designated as legal tender, it will ordinarily be accompanied by nominalism. Legal tender is money that, if tendered by a debtor in payment of his monetary obligation, may not be refused by the creditor.
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