Love Me (Legal) Tender: Notes, “Federal Reserve” and otherwise

“31 U.S. Code § 5103 – Legal tender:

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.”

The things in the first sentence are all legal tender; the things in the second sentence are not.

Consider this: “Bananas, apples, and pears are legal fruits for all meals and eating purposes. Snails, stones, and marbles are not legal fruits for eating.”

Okay, that makes sense. Think about what 31 U.S. Code § 5103 says though– it gives several examples of things that can be used to pay debts. By no means does it say that nothing else can be used for that purpose. It lists things that can’t be used for paying debt. This “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks)” is not an exhaustive list. Other fruits can be eaten legally.


Ҥ 25-3-104. Negotiable instrument.

(e)        An instrument is a “note” if it is a promise and is a “draft” if it is an order. If an instrument falls within the definition of both “note” and “draft”, a person entitled to enforce the instrument may treat it as either.”


The above is from the UCC section of NC General Statutes. “Negotiable instrument” is an expansive term that includes many things- a check is a negotiable instrument, in that you can sign it over to someone else. It differs from a note. A note is legal tender; rather than an order to pay (what else is a check?), it is a promise to pay.

To further clarify: a check is an order to pay (funds from an existing account), while a note, being a promise to pay, actually creates the funds. As soon as the Federal Reserve makes a dollar bill, it is worth a dollar. It is a Federal Reserve note.

A check moves/transfers money, while a note is money for all intents and purposes.

This will cast new light on what a promissory note is for some people. It is in the same class as a Federal Reserve Note– all notes are promissory notes.  So what did you give when you signed that Student loan or mortgage paperwork…?

What are your thoughts?

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