Presentation
Bai Salam
Bai Salam (Arabic بيع سلم, more accurately transliterated as Bai us Salami) is an Islamic contract
in which full payment is made in advance for specific goods (often agricultural products) to be
delivered at a future date.
Introduction
It is necessary that the quality of the commodity intended to be purchased is fully specified
leaving no ambiguity leading to dispute. Bai Salam covers almost everything which is capable of
being definitely described as to quality, quantity and workmanship.
For Islamic banks this product is an ideal for Agriculture Financing but can also be used to
finance the working capital needs to the business customer. It is one of the most popular Islamic
Modes of finance used by banks in Islamic countries to promote Riba -free transactions.
Early and contemporary jurists agree on the legitimacy of Salami. In general under Shariah law,
no sale is lawful unless the goods being sold are in existence at the time of the agreement. Salam
sale is an exception found in the Hadith provided the goods are defined and the date of delivery
is fixed.
Example
Upon migrating to Medina, where the people used to pay in advance the price of fruit or dates to
be delivered over one, two or three years. However, such sale was carried out without specifying
the quality, measure or weight of the commodity or the time of delivery. Prophet Mohammed
(SAW) ordained: “Whoever pays money in advance for fruit to be delivered later should pay it
for a known quality, specified measure and weight (of dates or fruit) of course along with the
price and time of delivery”.
Background
DIFFERENCES BETWEEN SALAM AND ISTISNA’A
There are several points of difference between Istisna and Salam which are summarized below:
The subject of Istisna is always a thing which needs manufacturing, while Salam can be affected
on anything, no matter whether it needs manufacturing or not.
It is necessary for Salam that the price is paid in full in advance, while it is not necessary
in Istisna. Payment for Istisna can be made in staggered basis.
The contract of Salam, once affected, cannot be cancelled unilaterally, while the contract
of Istisna can be cancelled before the manufacturer starts the work.
The object of the Salam is a liability on the seller to deliver, thus should be in the form of
fungible goods i.e. easily replaced from the market should the seller be unable to deliver.
Under the Istisna, the asset manufactured must meet specification of the order and the
buyer has the right not to take possession of the asset if the specifications are not met.
The time of delivery is an essential part of the sale in Salam while it is not necessary in
Istisna that the time of delivery is fixed. Any penalty for charged late delivery can reduce
the price of an Istisna contract but in a Salam, the penalty amount is paid to charity (not
taken as benefit for the buyer).
Conditions in Bai Salam
The Salam transaction is subject to the strict conditions a follows:
It is necessary for the validity of Salam that the buyer pays the price in full to the seller at
the time of affecting the sale. In the absence of full payment, it will be tantamount to sale
of a debt against a debt, which is expressly prohibited by Mohammed. Moreover, the
basic rationale for allowing Salam is to facilitate the "instant need" of the seller. If it is
not paid in full, the basic purpose will not be achieved.
Only those goods can be sold through a Salam contract in which the quantity and quality
can be exactly specified e.g. precious stones cannot be sold on the basis of Salam because
each stone differ in quality, size, weight and their exact specification is not possible.
Salam cannot be affected on a particular commodity or on a product of a particular field
or farm e.g. Supply of wheat of a particular field or the fruit of a particular tree. 24 hadith
reported by Imam Bukhari, Muslim and others.
All details in respect to quality of goods sold must be expressly specified leaving no
ambiguity, which may lead to a dispute.
It is necessary that the quantity of the commodity is agreed upon in absolute terms. It
should be measured or weighed in its usual measure only, meaning what is normally
weighed cannot be quantified and vice versa.
The exact date and place of delivery must be specified in the contract.
Salam cannot be affected in respect of things, which must be delivered at spot.
