Legal tender is a form of payment, defined by law, which must be accepted by creditors as payment for debts. Gold coins, silver coins, specie-backed notes, and paper currency not backed by specie have all at some time been legal tender in the United States.
The greenbacks issued during the Civil War were designated legal tender in the original legislation in 1862. Controversy developed when it became clear that the notes would continue to circulate after the war was concluded and that a disparity had developed between the value of a gold dollar and a greenback dollar.
In Hepburn v. Griswold (1870), the Supreme Court found the acts creating the greenbacks to be unconstitutional, ruling that forcing a creditor to accept payment in inflated currency was a violation of the 5th Amendment, protection of property under due process.
President Grant disapproved of the Courts position and immediately nominated two Republican justices. In a reversal of its initial position, the Court in Knox v. Lee (1871) ruled that Congress implied powers provided the authority for the issuance of the greenbacks.
Grant was roundly criticized by his opponents for packing the Court.
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Legal Tender Acts Wartime exigencies finally prompted the passage of a Legal Tender Act much like Spauldings. Abraham Lincoln signed it into law Feb. 1862, and "Greenbacks" began to circulate early in April. The first act authorized an issuanceLegal Tender Act much like Spauldings. Abraham Lincoln signed it into law Feb. 1862, and "Greenbacks" began to circulate early in April. The first act authorized an issuance of $150 ... http://www.civilwarhome.com/legaltender.htm