Legal Tender and consumer contract law

[trusaiyan]

Hi
I am asking this after a recent experience of a friend trying to pay with a £50 note in a restaurant after eating the meal and being rejected (without any suspicion of fraud). It raises some important legal questions that I don't think are fully answered on parts of the web.

I am aware that there is no 'hard' legal tender law in UK, meaning that retailers/shops/public bodies can reject cash that is deemed legal tender for normal retail transactions (it is not mandatorily accepted by law like in France, Denmark, State of Massachusetts etc, where it is illegal to recent cash where a payment obligation exists, as it should be in the UK but isn't.).

However, is this true where in situations where you have eaten a restaurant meal or after a taxi ride (where there is surely a 'debt')?

According to the Bank of England: "Legal tender has a narrow technical meaning which has no use in everyday life. It means that if you offer to fully pay off a debt to someone in legal tender, they can’t sue you for failing to repay."

The questions are therefore:

1. In the scenario whereby a £50 note is refused by a restaurant to pay for the meal AFTER eating it (or having legal tender rejected AFTER a taxi journey), it is true or false that a debt exists in the same sense as outlined in legal tender law?
2. If it is true, is it therefore correct that you have extinguished the debt in the eyes of the law by offering legal tender (£50 note or the correct legal tender amount) regardless of whether the restaurant or taxi driver accepts the cash?
3. If it is false and it is not considered a 'debt' in the sense outlined in legal tender law, does that mean they are still regarded as instantaneous retail transactions (what is this payment obligation regarded as)?
4. If instantaneous retail transactions are NOT covered by legal tender law, is that because these types of transactions are not regarded as a 'debt' in the same sense of a debt outlined in the legal tender provisions (or is it for another reason)?
5. If they are not a debt, what type of payment obligation are they in the eyes of the law?

Any legal experts welcome, cheers

[R0b]

The first thing you should know is that there is currently no law or regulation that obliges a trader or business to accept cash (although given the pandemic, there have been reports and recommendations to do so but there is no legal act thus far). Once you accept that position, I think your questions are really academic and not relevant.

A debt in its simplest form is a sum of money owed from one person to another, be it by contract, law or regulation or some other means. So your friend in this instance, would owe a debt to the restaurant and if they don't accept £50 then pay in a smaller denomination. It is actually quite common for businesses to refuse £50 notes because of a risk of the notes being a forgery and therefore out of pocket.

Your friend could have paid by card assuming he had cards in his wallet, or if he wanted to be a little awkward he could have offered to go and get some cash from the nearest machine.

[trusaiyan]

Hi
I am asking this after a recent experience of a friend trying to pay with a £50 note in a restaurant after eating the meal and being rejected (without any suspicion of fraud). It raises some important legal questions that I don't think are fully answered on parts of the web.

I am aware that there is no 'hard' legal tender law in UK, meaning that retailers/shops/public bodies can reject cash that is deemed legal tender for normal retail transactions (it is not mandatorily accepted by law like in France, Denmark, State of Massachusetts etc, where it is illegal to recent cash where a payment obligation exists, as it should be in the UK but isn't.).

However, is this true where in situations where you have eaten a restaurant meal or after a taxi ride (where there is surely a 'debt')?

According to the Bank of England: "Legal tender has a narrow technical meaning which has no use in everyday life. It means that if you offer to fully pay off a debt to someone in legal tender, they can’t sue you for failing to repay."

The questions are therefore:

1. In the scenario whereby a £50 note is refused by a restaurant to pay for the meal AFTER eating it (or having legal tender rejected AFTER a taxi journey), it is true or false that a debt exists in the same sense as outlined in legal tender law?
2. If it is true, is it therefore correct that you have extinguished the debt in the eyes of the law by offering legal tender (£50 note or the correct legal tender amount) regardless of whether the restaurant or taxi driver accepts the cash?
3. If it is false and it is not considered a 'debt' in the sense outlined in legal tender law, does that mean they are still regarded as instantaneous retail transactions (what is this payment obligation regarded as)?
4. If instantaneous retail transactions are NOT covered by legal tender law, is that because these types of transactions are not regarded as a 'debt' in the same sense of a debt outlined in the legal tender provisions (or is it for another reason)?
5. If they are not a debt, what type of payment obligation are they in the eyes of the law?

Any legal experts welcome, cheers

Thanks for the answer but it does not fundamentally answer the questions raised which I still think are important. My friend of course paid by other means, but we just want to know where we stand in the eyes of the law.

While I accept a retailer/business doesn't have to accept legal tender for instant/simultaneous transactions like when you bring a product to the counter to pay (which for the record I think is fundamentally immoral and the law should be changed as per other countries which have hard legal tender), I was not under the impression this was true where the services or goods have already been rendered and there is now a 'debt' existing (IF it is true that this constitutes a 'debt' as defined under legal tender law, which you appear to be suggesting does).

You must see the apparent contradiction if this is true: on the one hand retailers can refuse legal tender, but on the other hand you couldn't be successfully sued in court for non-payment if you tendered to pay off the debt in the correct legal tender. It therefore begs the obvious question: why would it not extinguish the debt at the point being tendered (at the point after the meal), if in a court situation it would in effect do just that?

If he walked away without paying in a different method, is it not true that he couldn't be successfully sued if he could prove he tendered for it in the exact required legal tender? And furthermore, he could just offer the court the £50 legal tender note, which must be used in court to extinguish the debt because it is legal tender (whether or not they accept it, the debt is discharged)?

According to the Bank of England: "It means that if you offer to fully pay off a debt to someone in legal tender, they can't sue you for failing to repay." I therefore fail to see how it does not in effect extinguish the debt by offering the legal tender, if it is not possible for him to be successfully sued for non-payment (unless it is NOT a debt in the eyes of the law)?

Any more thoughts?

[R0b]

Ok the example about your friend and the debt was probably not a good one but it was just an example of how a debt could occur. I think the question is when does the transaction actually complete? This is because before the completion of a transaction, a debt will not have arisen.

I would probably treat the transaction to be completed when the bill is presented for payment. It wouldn't make logical sense for the transaction to have completed every time you have a drink, starter, main and then dessert. Rather, on presentment of the bill, the transaction would have completed and then payment to be made in the form accepted by the restaurant.

If your friend then made off without payment and the restaurant sued him for the outstanding bill, then that is likely to be treated as a debt and in which case legal tender takes effect. Ultimately, if your friend wants to find out where he stands in the eyes of the law, why doesn't he try to offer a £50 note and then refuse to pay and see what happens. Bear in mind, whilst there is likely to be found a contract and a civil claim might be available, it is also a criminal offence of theft (making off without payment).

[trusaiyan]

Thanks for the answer but it does not fundamentally answer the questions raised which I still think are important. My friend of course paid by other means, but we just want to know where we stand in the eyes of the law.

While I accept a retailer/business doesn't have to accept legal tender for instant/simultaneous transactions like when you bring a product to the counter to pay (which for the record I think is fundamentally immoral and the law should be changed as per other countries which have hard legal tender), I was not under the impression this was true where the services or goods have already been rendered and there is now a 'debt' existing (IF it is true that this constitutes a 'debt' as defined under legal tender law, which you appear to be suggesting does).

You must see the apparent contradiction if this is true: on the one hand retailers can refuse legal tender, but on the other hand you couldn't be successfully sued in court for non-payment if you tendered to pay off the debt in the correct legal tender. It therefore begs the obvious question: why would it not extinguish the debt at the point being tendered (at the point after the meal), if in a court situation it would in effect do just that?

If he walked away without paying in a different method, is it not true that he couldn't be successfully sued if he could prove he tendered for it in the exact required legal tender? And furthermore, he could just offer the court the £50 legal tender note, which must be used in court to extinguish the debt because it is legal tender (whether or not they accept it, the debt is discharged)?

According to the Bank of England: "It means that if you offer to fully pay off a debt to someone in legal tender, they can't sue you for failing to repay." I therefore fail to see how it does not in effect extinguish the debt by offering the legal tender, if it is not possible for him to be successfully sued for non-payment (unless it is NOT a debt in the eyes of the law)?

Any more thoughts?

Thanks for the response.

So what you are really saying is under the eyes of the law, it is possible situations such as these (i.e. paying for a taxi service after the journey, paying for petrol after pumping, paying for a restaurant meal after eating it) are NOT in fact debts as would be defined under the law (your first post suggested they would be), and so the concept of legal tender as currently defined would not apply IF they cannot be regarded as debts?

But if they are not debts, what the heck are they? It seems to me while what you say is reasonable, they would in fact be regarded as debts under the law (or this has not been conclusively confirmed/is a grey area). Do you know the Acts of Parliament or legal precedents which concern this law?

If the whole purpose of legal tender is to protect debtors by requiring their cash be accepted for payment of debts, it would be ridiculous if the law allowed them to be successfully sued IF they tendered in legal tender to pay for said debts.

In the alternative, if at the point he pays for the meal it is NOT considered a debt (so not protected by legal tender concept), but the restaurant sues him for non-payment of the £50 debt after he leaves, at the point of being sued in court he could tender the £50 note again which would be protected under the legal tender principle, no?

That begs the question of why the law would not extinguish/discharge the debt at the point he tenders the £50 note legal tender if it is considered a debt, if it would do that in court (or does it not in effect do just that)?

Here is a real life example where Tesco were not able to sue someone as he tendered to pay his petrol 'debt' in legal tender:

"Contrary to popular belief, shops or individuals do have the right to refuse payment in coins or notes, even legal tender ones, before a transaction has taken place, and to demand payment in whatever form they choose. However, when the debt has already been incurred (which, under the concept of 'invitation to treat' the vendor has already supplied a good or service prior to payment), then they are obliged to accept settlement of that debt in legal tender currency up to the amount authorised in law (which in the case of £1 coins, is unlimited).

Because Tesco allowed a debt to be incurred by providing the petrol before the customer paid for it, they have to accept the customer's offer to settle the debt using legal tender currency. If they refuse to accept this form or payment, they cannot lawfully sue the customer to recover the debt, or have him arrested and charged with any crime relating to non-payment of the debt, because he has already made a legally reasonable offer to settle the debt in a form recognised as legal tender throughout the UK.

In this case, Tesco is in the wrong and the customer is well within his legal rights to try and settle the debt in pound coins, and to take their petrol free of charge if they refuse to accept his money. By refusing to accept his lawful payment, Tesco has certainly provided excellent value for money to the customer for this particular transaction.

At a time of soaring petrol prices, every little helps..."

Also, if it is true that these circumstances constitute a 'debt' as protected by legal tender principle, this would have significant real-life application, as it would mean many restaurants that do not take payment upfront would be breaking the law by stating after the meal that they 'only accept card' or 'do not accept £50 notes', when the law would allow customer's to settle their debts in legal tender denominations (or they can't be sued if they walk off without paying after being rejected').

I think we are going to get professional legal advice to try and settle the problem once and for all, out of interest were you previously a lawyer/legal expert?

[R0b]

Yes I did suggest the restaurant bill to being a debt, but as with most things under common law, whether something is treated as a debt or not will depend on the factual circumstances. As a general principle, a "debt" is regarded as a fixed sum of money, a formula as to how the money/price is calculated or, if the contract should so state, something else. The courts have, however, defined debt in other ways again depending on the specific facts of that case.

Sure, you can argue that a price on a restaurant menu is capable of creating a debt once you've ordered something, but in that kind of setting, you, or at least the restaurant, will not know that fixed price you need to pay until the bill has been presented - the same could go for a petrol station. A fixed debt debt is regarded as liquidated damages whereas an unknown sum of money would be unliquidated damages.

I can't really comment on that example because there's no real explanation of the law to back up that theory and how that person has arrived at that decision on a legal basis. I do think that person is wrong based on that statement generally.

What you are alluding in all of this is essentially what is known as a defence of tender before claim. It is a very specific and rarely used defence where if someone owes a debt, the debtor will have a defence if he/she has unconditionally offered to repay the debt. However, the catch to this defence is that you have to make a payment into court, and if I recall, that is done by making an application to the court and specifically stating the amount that has been tendered. If payment into court has not been made, then the defence is not available. You also can't rely on this defence for unliquidated damages.

Therefore, it is not a defence, as you are suggesting, for your friend to offer the £50 note and then think he has absolved himself of the debt. He would have to make the payment into court by application and the the cost of that application would be £255.

[trusaiyan]

Yes I did suggest the restaurant bill to being a debt, but as with most things under common law, whether something is treated as a debt or not will depend on the factual circumstances. As a general principle, a "debt" is regarded as a fixed sum of money, a formula as to how the money/price is calculated or, if the contract should so state, something else. The courts have, however, defined debt in other ways again depending on the specific facts of that case.

Sure, you can argue that a price on a restaurant menu is capable of creating a debt once you've ordered something, but in that kind of setting, you, or at least the restaurant, will not know that fixed price you need to pay until the bill has been presented - the same could go for a petrol station. A fixed debt debt is regarded as liquidated damages whereas an unknown sum of money would be unliquidated damages.

I can't really comment on that example because there's no real explanation of the law to back up that theory and how that person has arrived at that decision on a legal basis. I do think that person is wrong based on that statement generally.

What you are alluding in all of this is essentially what is known as a defence of tender before claim. It is a very specific and rarely used defence where if someone owes a debt, the debtor will have a defence if he/she has unconditionally offered to repay the debt. However, the catch to this defence is that you have to make a payment into court, and if I recall, that is done by making an application to the court and specifically stating the amount that has been tendered. If payment into court has not been made, then the defence is not available. You also can't rely on this defence for unliquidated damages.

Therefore, it is not a defence, as you are suggesting, for your friend to offer the £50 note and then think he has absolved himself of the debt. He would have to make the payment into court by application and the the cost of that application would be £255.

Thanks again for the response. This is getting even more interesting.

In regards to whether it would be liquidated or unliquidated damages, I am assuming if he orders 1 item with prices on the bill (and there is no service charge), he would know precisely what the debt is (granted the restaurant, for the purposes of the argument, concede it is exactly £50 that he owes in terms of the unpaid meal).

If he gets sued for non-payment of the £50 in a court setting, is it not true that the legal tender concept would prevail and must allow him to settle this debt in legal tender - i.e. the very £50 note that he was rejected in the restaurant setting!?

If this IS true that the court must accept the £50 note as it is legally defined tender (regardless if there are other costs and damages above the £50 debt), then we have a truly ridiculous/absurd situation whereby the customer can be lawfully rejected in legal tender to pay for his debt in the restuarant setting (assuming it is a fixed debt and it can be regarded as a 'debt' legally), but in a court setting the £50 note must be accepted to extinguish the debt once paid into court (because of the legal tender principle)!

However, if this is false and the court do not have to accept the £50 note to pay for his 'debt', then what the heck is the legal tender law actually doing? What situation could possibly arise whereby it could protect the debtor? Can you name one?

Thanks

[R0b]

Let's try to stick to the correct terminology as "debt" and "damage" is not the same thing and can be treated differently in the eyes of the law, but not something that needs discussing here.

I think you are conflating the meaning of legal tender with the process of discharging a debt by way of legal tender. You seem to think that merely because a bank note is legal tender, then one can discharge their debt upon presenting it for payment but as I've said in my initial post, that is not the case.

If you choose to use legal tender to pay for goods or services then the discharge of the debt is an absolute form of payment and the creditor cannot then argue otherwise. Whilst every creditor is entitled to be paid in legal tender, like I said there is no law that forces a creditor to accept that as the only method of payment. Even if they do accept legal tender as payment, there is no requirement to accept all forms and one could accept only £5 notes if they wanted to.

A defence of tender has been developed through common law i.e. case law and currently, the courts have explicitly stated that the defence can only relied on if payment is made into court of the amount tendered which the creditor is demanding. No ifs, buts or anything else - that is the process full stop whether you like it or not. However unfair you might think it is that is just the way our English legal system operates in the same way that the laws of England and Wales does not offer a legal remedy for everything.

[trusaiyan]

Let's try to stick to the correct terminology as "debt" and "damage" is not the same thing and can be treated differently in the eyes of the law, but not something that needs discussing here.

I think you are conflating the meaning of legal tender with the process of discharging a debt by way of legal tender. You seem to think that merely because a bank note is legal tender, then one can discharge their debt upon presenting it for payment but as I've said in my initial post, that is not the case.

If you choose to use legal tender to pay for goods or services then the discharge of the debt is an absolute form of payment and the creditor cannot then argue otherwise. Whilst every creditor is entitled to be paid in legal tender, like I said there is no law that forces a creditor to accept that as the only method of payment. Even if they do accept legal tender as payment, there is no requirement to accept all forms and one could accept only £5 notes if they wanted to.

A defence of tender has been developed through common law i.e. case law and currently, the courts have explicitly stated that the defence can only relied on if payment is made into court of the amount tendered which the creditor is demanding. No ifs, buts or anything else - that is the process full stop whether you like it or not. However unfair you might think it is that is just the way our English legal system operates in the same way that the laws of England and Wales does not offer a legal remedy for everything.

So if I follow you correctly, you are stating that at the point he is sued for non-payment of the debt, he isn't actually being sued for the debt but it is being treated as 'damages' in the eyes of the law, which would not be protected by the legal tender principle?

Why can't the restaurant simply use the courts to demand payment of the debt, like non-payment of an invoice? And in this situation, if he is paying for his 'debt' in court (and not being sued for other things), why would the legal tender principle not apply?

As I asked before, can you therefore state a situation where the principle of legal tender would apply? Both the Bank of England and Royal Mint accept (according to their websites) that this principle is a part of our legal system, but I am yet to see how it is being applied if it doesn't work in the sitations I have outlined?

When would the legal tender law protect the debtor in a court situation? Please explain?

It sounds like it doesn't actually exist or is being interpretted as being overruled by current legal precedent.

[R0b]

So if I follow you correctly, you are stating that at the point he is sued for non-payment of the debt, he isn't actually being sued for the debt but it is being treated as 'damages' in the eyes of the law, which would not be protected by the legal tender principle?

No, a debt is a fixed sum of money and damages are usually a remedy that is awarded other than non-payment of a debt which results from a breach in a contract. A debt is a form of liquidated damages which is an overarching term for damages referring to fixed or determined sums of money. I'm not going to go into any more detail than that because it is unnecessary for this discussion.

The restaurant could very well use the court to obtain judgment for an order to pay the debt, but that's not the issue you are describing here. The legal tender principle you are referring to is what I've already described i.e. it is a defence and nothing more.

Example scenario:

Company A renders services for Company B and then invoices on completion of those services for the sum of £2,000. Company B does not pay Company A on time and becomes indebted to Company A. Company A then writes to company and demands payment of the £2,000 otherwise it will take legal action. Company B goes to the offices of Company A and offers to repay the debt in cash notes but this is refused by Company A. Company B then makes a payment in to the Court Funds Office £2,000. Company A then issues legal proceedings and sues for £2,000. Company B has a defence of tender before claim on the basis that it unconditionally offered Company A the full amount due but if was refused.

[Manxman]

Here is a real life example where Tesco were not able to sue someone as he tendered to pay his petrol 'debt' in legal tender:

"Contrary to popular belief, shops or individuals do have the right to refuse payment in coins or notes, even legal tender ones, before a transaction has taken place, and to demand payment in whatever form they choose. However, when the debt has already been incurred (which, under the concept of 'invitation to treat' the vendor has already supplied a good or service prior to payment), then they are obliged to accept settlement of that debt in legal tender currency up to the amount authorised in law (which in the case of £1 coins, is unlimited).

Because Tesco allowed a debt to be incurred by providing the petrol before the customer paid for it, they have to accept the customer's offer to settle the debt using legal tender currency. If they refuse to accept this form or payment, they cannot lawfully sue the customer to recover the debt, or have him arrested and charged with any crime relating to non-payment of the debt, because he has already made a legally reasonable offer to settle the debt in a form recognised as legal tender throughout the UK.

In this case, Tesco is in the wrong and the customer is well within his legal rights to try and settle the debt in pound coins, and to take their petrol free of charge if they refuse to accept his money. By refusing to accept his lawful payment, Tesco has certainly provided excellent value for money to the customer for this particular transaction.

At a time of soaring petrol prices, every little helps..."

What judgment is that from? Are you saying Tesco were not able to sue, or that they did sue but lost?

A freestanding "quote" is meaningless.