MAHYUDDIN KHALID emkay@salam.uitm.edu.my

FIQH MUAMALAHISLAMIC BUSINESS TRANSACTION

CHAPTER TEN

BAY’ AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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DEFINITION EVIDENCE PILLARS OF AL-SALAM OBJECTIVE OF BAY’ AL-SALAM CONDITION OF BAY’ AL-SALAM DISADVANTAGE OF BAY’ AL-SALAM

CONTENT

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

3

Literally salam or salaf means pre-payment Technically:

A sale with postponed delivery of the merchandise but immediate payment of the price.

Bay’ as-Salam or Salam means a contract in which advance cash payment is made for goods to be delivered later on.

The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract.

Salam- also know as sales by order.

DEFINITION

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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Al-Quran .

lbnu Abbas commented that: ‘I bears the witness that al-Salaf (Al-Salam) stipulated for a stated term had been made legal by Allah in His holy book and His permission is in it”. He then recites the above verse.

Hadith Narrated by lbn Abbas: The Messenger of Allah (s.a.w)

came to Medina and the society used to pay in advance the price of fruits to be delivered within one or two years (the sub narrator is in doubt whether it was one to two years or two to three years)

The Prophet S.A. said, “Whoever pays money in advance for dates (to be delivered later) should pay it for known specified weight and measure (of the dates).

EVIDENCE

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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Ijma’ Every single jurist that we came across had given

their consensus with regards to the permissibility of Bay’ Al-Salam particularly because the product in sale is one of counter-values in a contract (similar to the permissibility of postponing the monetary payment which is one of the counter — value as well).

There is also the need of the people in it. The owners of the agricultural products and businesses also needed some financing to support themselves or to fund their crops until the day of harvesting. Hence, it is made permissible to fulfill these needs.

EVIDENCE

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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Salam transaction occurs if the buyer has paid the purchase price to the seller in full at the time of sale. This is necessary so that the buyer can show that they are not entering into debt with a second party in order to eliminate the debt.

Salam is actually an exception from the general ruling on the illegality of selling non—existence items (Bay’ Ma’dum) since it can achieve certain economic objectives, as a rukhsah (exception) and an assistance for the people.

Debt does not necessarily involve cash money but it can also involves every single item and property by the business society as a tradable item.

NATURE OF BAY’ AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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1. Al-Muslim The Buyer

2. Al-Muslam Ilaihi The Seller

3. Al-Muslam The Price

4. Al-Muslam Fih The Product

5. Sighah Ijab (Offer) Qabul (Acceptance)

PILLARS OF AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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FLOWS OF BAY’ AL-SALAM

Muslam (Price)

Muslam Ilaihi (Seller)

Muslam Fih (Product)

Muslim (Buyer)

1) Ijab (Offer)

2) Qabul (Acceptance)

3)

4)

DEFINITION

EVIDENCE

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Buyer A contract with Seller B to buy Product C for the price of D

Product C are not yet grown but the price D has been fixed upon them and A pays B at that moment D amount.

A and B agree that after 3 months that B shall deliver the C to A.

FLOWS OF BAY’ AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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1. Provide the financing for small and medium enterprises The economic reality underlying the contract of

Salam, the ordering of goods to be delivered later for a price paid in advance, was the financing of the business of a small trader or artisan by his customers.

2. Benefits the trader or producer Provides Islamically accepted financing alternative

and avoids any involvement in riba3. Benefits the purchaser

Provides goods and products at a discounted price in return for the willingness of the purchaser to help the financing of the business venture.

THE OBJECTIVES OF BAY’ AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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1. The jurists from various mazhab had agreed that Bay’ Al-Salam is permissible provided that it specifies these six aspects (summarized as 4 Ps + 2 Qs), which are: Product: The types and kinds of goods involved in

the trade. Period: The duration of the contract and its date of

delivery. Price: The amount of capital or price paid for the

contract. Place: Place of delivery for the merchandise when it

is due. Quality: The characteristics and specifications of

every item. Quantity: The quantity of goods ordered by the

buyer.2. The majority of jurists stated that the duration of Salam

contract must be specified with a precise date of delivery and not with a vague period of time.

CONDITIONS OF AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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3. The price must be fully paid in advance without exception. Any amount paid less than the amount specified

would make the contract null and void. 4. The pricing under Salam would normally be lower

compared to the normal type of sale or even the deferred payment sale.

5. The product with similar types and specifications must be vastly available in the market at the time of contract until the time of delivery. The main concern behind this condition is the

capability of the trader to deliver the product especially perishable items or non-manufactured merchandise that could not simply be produced if it is destroyed or damaged.

CONDITIONS OF AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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6. The product must not be attributed to a certain area or location. If it is product with possibility shortage of supply due

to diseases or natural disaster, it is not permissible to deal with Salam since the delivery will not be guaranteed and it is part of an unnecessary risk (gharar).

7. Islam does not object the postponement in delivery of any products involved in a trading. However, it must not involve usurious or ribawi

materials from the same categories though it differ in terms of types such as currency with gold or silver, RM with USD and rice with sugar.

CONDITIONS OF AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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Bay’ As-Salam is open for exploitation to the extent that it could be considered as illegal for buyers that try to tightly squeeze the price that the trader need to accept especially those that are really desperate.

Hence, it will change something that is considered as legal in Islam to assist traders into something that is illegal and leads towards exploitation and destruction in the name of Islam, which Islam has nothing to do with.

To avoid and prevent any exploitation that might occur and taking into consideration the needs of farmers, Khalifah Umar Al-Khattab r.a had dispersed loans for them at the time of cultivation from the property of the Baitul Mal to finance the maintenance of their crops and refinance what they borrowed during the harvesting season.

THE DISADVANTAGE OF BAY’ AL-SALAM

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

BAY’ AL-SALAM AND BAY’ ISTISNA’

Bay’ Al-Salam and Bay’ Al-Istisna’ are both deferred delivery contract, however both instruments have its own application.

Salam is equivalent to a forward sales for agricultural products while,

Istisna’ is a forward sales for manufacturing or construction contract.

BAY’ AL-SALAM BAY’ ISTISNA’

Salam can be effected on any thing, no matter whether it needs manufacturing or not.

The subject of Istisna is always a thing which needs manufacturing

It is necessary for Salam that the price is paid in full in advance

Payment for Istisna can be made in staggered basis.

The contract of Salam, once effected, cannot be cancelled unilaterally

The contract of Istisna can be cancelled before the manufacturer starts the work

DEFINITION

EVIDENCE

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BAY’ AL-SALAM ELEMENT NORMAL SALES

Must specified the duration of the contract and its date of delivery

DURATION Does not permit any time frame

A contract in which advance cash payment is made for goods to be delivered later on

NATURE A permanent contract without any specified period of expiration

At a discount – cheaper than normal pricing

PRICING Market rate – based on the ability to pay cash

Any thing, no matter it needs manufacturing or not.

SUBJECT Physical Goods and property

DIFFERENCES BETWEEN BAY’ AL-SALAM & NORMAL SALES

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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