Legal Definitions - fungible things

Fungible things are items that are completely interchangeable with other items of the same type. This means that one unit of a fungible item is considered practically identical to another unit, and can easily replace it without any significant difference in value, quality, or function. Their value is typically determined by their quantity or standard market price, rather than any unique characteristics.

Here are some examples to illustrate this concept:

• Example 1: Standard-grade agricultural commodities

  Imagine a food manufacturer that contracts to purchase 500 tons of #1 grade hard red winter wheat from a supplier. If the initial shipment of wheat is somehow damaged or lost in transit, the supplier can simply provide another 500 tons of the exact same #1 grade hard red winter wheat from a different silo or batch. The manufacturer doesn't care about the individual grains of wheat; they only require the specified quantity and quality. One ton of this specific grade of wheat is functionally and commercially identical to any other ton of the same grade.

• Example 2: Mass-produced electronic components

  Consider a company that manufactures smartphones and orders 10,000 units of a specific model of microchip from a supplier. If 50 of those microchips are found to be defective upon arrival, the supplier can easily replace them with 50 other identical microchips of the same model. Each microchip is manufactured to the same precise specifications, performs the same function, and holds the same market value. The manufacturer does not expect a particular, unique microchip, but rather a functional component that meets the agreed-upon standards.

• Example 3: Shares of a publicly traded company

  An investor owns 200 shares of Company Z, which is listed on a major stock exchange. If the investor decides to sell 50 of those shares, they are not selling specific, individually identifiable shares. Instead, they are selling a portion of their ownership stake, and any 50 shares of Company Z are considered equivalent to any other 50 shares of Company Z. The value is tied to the company's overall performance and market perception, not to the unique identity of any particular share certificate.