SALAM
Presented by:
Mr. Muhammad Ishtiaq
SALAM
Introduction
The basic conditions for a validity of a sale in Shriah are
three:
(1)The purchased commodity must be existing,
(2)The seller should have acquired the ownership of
that commodity,
(3)The commodity must be in the physical or
constructive possession of the seller,
There are only two exceptions to this principle in
Shariah:
(1)Salam
(2)Istisna
• Definition &Concept
• Seller agrees to supply specific goods
to the buyer at a future date in
exchange of an advanced price fully
paid at spot.
• Price is in cash but the supply of
goods is deferred.
Background of Salam
• Before prohibition of interest farmers used
to get interest based loans for growing crops
and harvesting. After prohibition of interest,
they were allowed to do Salam transactions.
This helped them to get money in advance
for their needs.
• During the days of our prophet (S.W.) the
caravans used to get interest based loans for
purchasing the commodities. After
prohibition of interest, they were allowed to
do Salam.
Purpose of Salam
• To meet the needs of small farmers
who need money to grow their crops
and to feed their family up to the time
of harvest.
• To meet the need of working capital
• To meet the needs of liquidity
problem.
• To meet the need of traders for import
and export business.
Salam is beneficial to the
seller,because he receives the price
in advance,and it is beneficial to the
buyer also,because normally,the
price in salam used to be lower then
the price
in spot sales.
Conditions of Salam
(1) It is necessary for the validity of Salam that the buyer
pays the price in full to the seller at the time of effecting
the sale, because the basic wisdom for allowing Salam is
to fulfill the instant need of the seller. If its not paid in
full, the basic purpose will not be achieved.
(2) 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.
(3) All details in respect to quality of goods sold must be
expressly specified leaving no ambiguity which may
lead to a dispute.
(4)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.
(5) Salam cannot be effected 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 since
there is a possibility that the crop is destroyed before
delivery and given such possibility, the delivery remains
uncertain.
(6)The exact date and place of delivery must be specified in
the contract.
(7) Salam
cannot be effected in respect of
things, which must be delivered at spot. e.g
Salam b/w wheat and barley.
(8)The commodity of Salam contract should
remain in the market right from day of
contract up to the date of delivery or at least
at the date of delivery.
(9) there should be actual delivery of
commodity.
Difference b/w Salam & Murabaha
Salam
• In Salam,
purchased goods
are deffered, price
is paid on spot.
• In Salam price has
to be paid in full in
advance.
Murabaha
•
In Murabaha
purchased goods
are delivered at
spot, price may be
either on spot or
differed.
• In Murabaha price
may be on spot or
differed.
Delivery of Salam goods
• Before delivery, goods will remain at the
risk of seller.
• After delivery, risk will be transferred to the
purchaser.
• Possession of goods can be physical or
constructive.
• Transferring of risk and authority of use and
utilization/consumption are the basic
ingredients of constructive possession.