Legal Definitions - loan for consumption

A loan for consumption is a legal agreement where one party (the lender) provides goods to another party (the borrower) with the understanding that the borrower will use up or consume these specific goods. The borrower is then obligated to return an equivalent amount of goods, matching the original in type, quantity, and quality, rather than returning the exact items initially borrowed. This type of loan is typically used for fungible goods, which are items that can be easily replaced by identical items.

Examples:

• Agricultural Commodities: A small farm experiences an unexpected delay in its feed delivery and needs to feed its livestock immediately. A neighboring farmer agrees to lend them 50 bushels of oats.

  This illustrates a loan for consumption because the borrowing farm uses the oats to feed their animals, consuming the specific grain provided. Once their own feed delivery arrives, they are legally bound to return 50 bushels of oats of the same quality and type to their neighbor. The original oats are gone, but identical oats replace them.

• Construction Materials: A construction crew is working on a critical concrete pour and unexpectedly runs short of a specialized type of quick-setting cement. A nearby construction site, having surplus, lends them 10 bags of this specific cement mix.

  Here, the borrowing crew incorporates the lent cement into their project, consuming it in the construction process. Their agreement dictates that they must replace the 10 bags with the exact same type and brand of quick-setting cement once their next supply shipment arrives. The original cement is used, and new, identical cement fulfills the obligation.

• Emergency Fuel Supply: A remote community experiences a power outage, and the local generator runs low on diesel fuel before a new shipment can arrive. A nearby logging camp, with extra reserves, lends the community 200 gallons of diesel.

  This is a loan for consumption because the community uses the lent diesel to keep its generator running, consuming the fuel. When their regular fuel delivery resumes, the community is obligated to return 200 gallons of diesel of the same grade to the logging camp. The original fuel is burned, and an equivalent amount of new fuel is provided in return.