The Legal Tender Cases

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The Legal Tender Cases were a series of decisions in the U.S. Supreme Court in the early 1870s concerning the power of the federal government to order that everyone accept government money (bills of credit) as payment for all obligations, public and private.

The cases arose from the issuance of "greenbacks" during the Civil War and the Legal Tender Act of 1862, which declared that this government money must be accepted for all debts, public and private. In Hepburn v. Griswold (1870), the U.S. Supreme Court invalided the law as applied to pre-existing debts as a violation of the Obligation of Contract Clause.

But a change in membership and the strong disapproval of President Ulysses S. Grant led the Court to reverse its decision the following year in Knox v. Lee (1871), and it upheld the Legal Tender Act.

In Julliard v. Greenman (1884) the Supreme Court extended its rule beyond the justification of war and into peacetime. In the 1930s the Supreme Court extended its rule further to prohibit clauses in private contracts that required the payment of gold.

Critics of these decisions, such as Justice Stephen Field, observed that the Founders clearly opposed government power to issue legal tender.

The Legal Tender Cases are cited today for the principle that the Takings Clause reaches only a direct appropriation of property.