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Cold Sea

Legal Tender

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Cold Sea
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 Legal tender refers to banknotes or coin that may be legally offered in payment of an obligation and that a creditor is obliged to accept.

The above is the definition as given by the SA Reserve Bank. Then we get non-legal tender. Bitcoin (and even a cheque) for instance is non-legal tender, as you do not have to accept it as payment as a creditor.  The following is also from the SARB website

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After unification of South Africa in 1910 the country used British coin, as well as coin of the Zuid-Afrikaansche Republic. The latter remained legal tender until 1938, while British coin remained legal tender until 1961

So ZAR is not legal tender anymore, but what does this mean. Am I allowed to melt, deface, alter or even copy them and sell them, not fraudulently, but as copies (can I do that with a cheque?). I contacted the Reserve Bank, but could not get a definite answer on the ZAR series. I know there is an opinion that we may not deface these coins, but I wonder if this is so.

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Mike Klee

As the modern South African half-cent, one cent and two cent coins are no longer accepted as payment to a creditor in our South African society today, I would have thought that this by default makes such coins no longer legal tender?

Similarly, no shop - unless owned by a numismatist! - would accept ZAR coins as no creditor would accept them either. As such, my personal opinion would be that one would most certainly be legally permitted to melt or deface them.

Re copying them, the only reason this would normally be done would be to fraudulently pass them off as genuine and to make a monetary profit from such fraud. Fraud is illegal in South Africa.....

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Cold Sea

Hi Mike,

My understanding is that the half cent, one cent and two cent coins, including the Union coins from 1923 onwards are all still legal tender. The grocer may not accept them, but the Reserve Bank will. You may not counterfeit, deface, etc these coins (even the one cent pieces we used to put on the railway line). On the other hand, no one, including the Reserve Bank has to accept the ZAR coins, as these are officially non-legal tender.

I mentioned copying of the ZAR coins merely to illustrate that, in my opinion, you are allowed to do this. What you do after this with them is another story, but is it illegal to own a counterfeit one? This leads me to say that the same applies to de-facing, and here I think specifically of the trench art coins. Before 1938, when they were still legal tender, you were not allowed to damage, melt etc these coins, making trench art coins illegal. Now that they are non-legal tender, can we own and sell trench art coins?

 

 

 

Edited by Cold Sea

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Mike Klee

Hi  " Cold Sea"

Good points! Delving further into the matter, one has to begin with the definition of "legal tender". Googling this, the first definition is: " Legal tender refers to banknotes or coin that may be legally offered in payment of an obligation and that a creditor is obliged to accept."

Now, if creditors are not prepared to accept half cent, one cent and two cent coins, to my mind this nullifies such coins as being legal tender.

I am unaware of the Reserve Bank instituting criminal proceeding against anybody damaging, melting down or defacing such coins. Equally, I believe that the highest courts of the land would find against the stance of the Reserve Bank re such coins remaining "legal tender" - which is why, in a the same vein,  nothing has been done re the massive amount of South African crowns and silver minors which are being sent to refineries and melted down for their silver content.

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Cold Sea

Hi Mike,

This legal tender thing is confusing to me as well. However, I know that the grocer must accept the coins, but there is a maximum amount, which is small, per coin. In other words, you cannot pay with a wagon load full of 10c or 1c pieces. This is the same as non legal tender. With notes there's no maximum amount, so you can pay with a wagon load full of R10 notes. The grocer doesn't have to accept it, but he cannot sue you for non payment. It is legal tender.

As for melting these coins, it will be illegal, whether people are being charged or not. Only the Reserve Bank's allowed to destroy coins and notes. After all as they say, you are only the custodian of your coin.

Edited by Cold Sea

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Cold Sea

Below the response received today from the Reserve Bank regarding my query about ZAR coins' status. LSD would mean Legal Services Dept and CMD currency management department. 

 

Quote

 

LSD has previously advised CMD that ZAR coins issued between 1892 and 1902 (“ZAR Coins”) remain legal tender in South Africa until demonetised by the Minister of Finance. That advice remains constant and is hereby reiterated.

 We agree with Maggie’s views that defacing of the abovementioned ZAR Coins will amount to a contravention of the South African Reserve Bank Act (s34). Trading in altered or counterfeit ZAR Coins (like all other legal tender coins) will also be a contravention of the South African Reserve Bank Act(s34). Anyone who willingly defaces ZAR Coins or counterfeits them, may be criminally prosecuted for contravention of the provisions of the South African Reserve Bank Act (s34). Any reproduction of ZAR coins is subject to the same requirements as other legal tender coins.  

  

 

 

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Mike Klee

Hi Cold Sea

A most interesting response. Re " legal tender", in the last few days I have pointedly asked cashiers at Food Lovers Market and Spar if they would accept 5 cent coins - didn't even bother with half cents/1 cents/2 cents - and received a very emphatic "No" each time.

Forget ZAR coinage, we know that even the more recent silver Union coinage is being bought up wherever possible and smelted down for the precious metal value. So if we know this, the Reserve Bank must know this as well - but apparently hasn't acted to halt it? Maybe LSD and CMD could advise whether they have at any time initiated an investigation into this practice, plus if there have been any consequences for the "culprits"?

Actually, this whole thing of smelting down coins non-circulating seems silly to me. The reality is that nobody is going to exchange a 1947 crown at the reserve Bank for 50 cents as the intrinsic silver value is so very much more. Equally, the reality is also that the owners of such non-circulating silver coins will find a buyer for their coins at the best price possible, with the buyers of these coins invariably having them melted down for the value of the silver......

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Cold Sea

Hi Mike,

Here it seems that Dickens was right , sometimes the law is an ass. I don't think the law will change soon, but at least I know where I stand.

 

Edited by Cold Sea

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Cold Sea

While thinking about trench art coins and whether they should be classified as defaced coins, I remembered a discussion around the Single 9 ZAR pound, which is according to the Reserve Bank still legal tender.

NGC graded this coin, which has Consul Macrum’s initial engraved on it, MS 63 PL with “M” monogram added as an attribution. Now this engraving should be seen as Graffiti, and the coin will not be given a Numerical Grade. NGC’s explanation for assigning a full grade here is that the coin is of historical significance and the post mint mark can be ignored. That sounds like a logical explanation.

The trench art coins come from the same historical period and I think the Reserve Bank should, by following NGC’s view, be lenient when we collect these.

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