ADVANCED FIQH MUAMALAT (IFE705)

CHAPTER 2.3:
CONTRACT OF EXCHANGE –
BAY` AL-SALAM (FORWARD SALE)

Heizal Hezry Omar

Dr Mohammad Firdaus Mohammad Hatta

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OBJECTIVES
After completing this chapter, students should be
able to:
Understand the concept of Bay` Al-Salam in Islamic
Muamalat.
Differentiate Bay` Al-Salam with other type of
transactions and analyze the differences of opinion
among the Muslim jurists.
Apply their understanding to modern business
practices.

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OUTLINE
Introduction
Legal evidence
Objectives of Bay` Al-Salam
2 types of Salam
Salam sukuk
Alternatives for marketing salam goods
Conditions of salam
The difference between salam and other contracts
Disposing of the goods purchased on salam
References

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INTRODUCTION
• Definition:
• Literally: ‘giving (`ita`), advancing (taslif) and
leaving.

• Technically: ‘It is a sale contract whereby the

seller undertakes to sell some specific
commodities to the buyer at an agreed future date
in exchange for a price fully paid in advance on
spot basis’.

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• Meaning to say:
• The selling of goods which normally does not
exist with the buyer during the time of contract
such as wheat, cotton or bean with the condition
that the delivery must be completed at the time
yield which is the harvesting season.

• The opposite of ‘BBA’.

• Resembles Bay` al-Istisna`.
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LEGAL EVIDENCE
Ibn Abbas commented that:
‘I bear 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 ‘O you who
believe! Whenever you give or take credit for a
stated term, set it down in writing’.
(Al-Baqarah, 2: 282)
(ُ‫)ۚ ﯾَﺎ أَﯾﱡﮭَﺎ اﻟﱠﺬِﯾﻦَ آ َﻣﻨُﻮا إِذَا ﺗَﺪَاﯾَﻨﺘُﻢ ﺑِ َﺪﯾْﻦٍ إِﻟ َٰﻰ أَﺟَﻞٍ ﱡﻣ َﺴ ّﻤًﻰ ﻓَﺎ ْﻛﺘُﺒُﻮه‬

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 Narrated Ibn `Abbas:
The Prophet‫ ﷺ‬came to Medina and the people
used to pay in advance the price of dates to be
delivered within two or three years. He said (to them),
"Whoever pays in advance the price of a thing to be
delivered later should pay it for a known specified
measure and a known specified weight and a known
specified period."*

ِ‫ﷲ‬ ‫ ﻋَﻦْ َﻋ ْﺒ ِﺪ ﱠ‬،ٍ‫ أَﺧْ ﺒَ َﺮﻧَﺎ اﺑْﻦُ أَﺑِﻲ ﻧَﺠِ ﯿﺢ‬،َ‫ أَﺧْ ﺒَ َﺮﻧَﺎ اﺑْﻦُ ُﻋﯿَ ْﯿﻨَﺔ‬،ُ‫ﺻ َﺪﻗَﺔ‬
َ ‫َﺣ ﱠﺪﺛَﻨَﺎ‬
‫س ـ رﺿﻰ ﷲ ﻋﻨﮭﻤﺎ ـ ﻗَﺎ َل‬ ٍ ‫ ﻋَﻦِ اﺑْﻦِ َﻋﺒﱠﺎ‬، ِ‫ ﻋَﻦْ أَﺑِﻲ ا ْﻟ ِﻤ ْﻨﮭَﺎل‬،ٍ‫ﺑْﻦِ َﻛﺜِﯿﺮ‬
ِ‫ َوھُ ْﻢ ﯾُ ْﺴﻠِﻔُﻮنَ ﺑِﺎﻟﺘﱠ ْﻤ ِﺮ اﻟ ﱠﺴﻨَﺘَﯿْﻦ‬،َ‫ﻗَ ِﺪ َم اﻟﻨﱠﺒِﻲﱡ ﺻﻠﻰ ﷲ ﻋﻠﯿﮫ وﺳﻠﻢ ا ْﻟ َﻤﺪِﯾﻨَﺔ‬
، ٍ‫ ﻓَﻘَﺎ َل " ﻣَﻦْ أَ ْﺳﻠَﻒَ ﻓِﻲ ﺷَﻰْ ءٍ ﻓَﻔِﻲ َﻛﯿْﻞٍ َﻣ ْﻌﻠُﻮمٍ َووَزْ نٍ َﻣ ْﻌﻠُﻮم‬، َ‫وَاﻟﺜﱠﻼَث‬
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Ijma`:
Jurists are consensus with regard to the
permissibility of ‘bay` al-salam’; since one of
counter-values present in the contract.

The need of it; agriculture, poultry, industry &

services.

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 Bay` al-ma`dum is illegal as in hadith: Narrated Hakim
ibn Hizam: Hakim asked (the Prophet): Messenger of
Allah, a man comes to me and wants me to sell him
something which is not in my possession. Should I buy it
for him from the market? He replied: Do not sell what you
do not possess (not with you / not exist).*
،َ‫ ﻋَﻦْ ﯾُﻮﺳُﻒَ ﺑْﻦِ ﻣَﺎھَﻚ‬،ٍ‫ ﻋَﻦْ أَﺑِﻲ ﺑِ ْﺸﺮ‬،َ‫ َﺣ ﱠﺪﺛَﻨَﺎ أَﺑُﻮ َﻋﻮَاﻧَﺔ‬،ٌ‫َﺣ ﱠﺪﺛَﻨَﺎ ُﻣ َﺴ ﱠﺪد‬
‫ﷲِ ﯾَﺄْﺗِﯿﻨِﻲ اﻟ ﱠﺮ ُﺟ ُﻞ ﻓَﯿُﺮِﯾ ُﺪ ِﻣﻨﱢﻲ‬
‫ ﻗَﺎ َل ﯾَﺎ َرﺳُﻮ َل ﱠ‬، ٍ‫ﻋَﻦْ َﺣﻜِﯿﻢِ ﺑْﻦِ ﺣِ ﺰَام‬
َ‫ق ﻓَﻘَﺎ َل " ﻻَ ﺗَﺒِ ْﻊ ﻣَﺎ ﻟَﯿْﺲ‬ ِ ‫ا ْﻟﺒَ ْﯿ َﻊ ﻟَﯿْﺲَ ِﻋ ْﻨﺪِي أَﻓَﺄ َ ْﺑﺘَﺎ ُﻋﮫُ ﻟَﮫُ ﻣِﻦَ اﻟﺴﱡﻮ‬
."‫ك‬ َ ‫ِﻋ ْﻨ َﺪ‬
1) Bay` al-Salam is an exception (Some scholars).
2) (Some other scholars) said: The above hadith implies
that the seller is not permitted to make any transaction if
he is not sure of being able to deliver the goods, because
such a sale is gharar. (Hassan, 1986).
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 OBJECTIVES OF BAY` AL-SALAM
1) Farmers do not have enough capital & no one could loan
out based on Islamic law. Alternatively, ‘Bay` al-Salam’.

2) Avoiding great sin ‘War Against You’, declared by God.

3) Helping producers in stimulating them in production and

to fulfill the instant needs by producers/sellers. If the price
is not paid in full, the basic purpose of the transaction will
be defeated.

4) Helping purchasers in the sense that at a discounted

price.

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2 TYPES OF AL-SALAM
1) Normal al-Salam (al-Salam al-Asli/al-Adi):
A contract having been entered by two parties
(capital provider & producer) without any
pre-entered transaction.

2) Parallel al-Salam (Salam al-Muwazi):

It involves 2 separate transactions.
The Islamic bank/buyer entered into another salam,
acting as the seller with no connection to the first
transaction.

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NORMAL SALAM

12
PARALLEL SALAM

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SALAM SUKUK
BMA
1) BMA incorporates Special Purpose Mudharabah

2) Issues salam sukuk

BMA SPM PRIMARY
SUBSCRIBE
2) Proceeds BHD 250 mil in cash
R

4) Promise to purchase at BHD 300

3) Purchase crude oil at BHD mil on the date when it is due to be
250 mil on a salam basis. delivered.

PRODUCE BAHRAIN
R REFINERY

Iqbal & Mirakhor, 2007;

Suruhanjaya Sekuriti, 2009 14
BMA incorporates Special Purpose Mudharabah (SPM)
BMA SPM (Bahrain Monetary Agency Special Purpose
Mudharabah) issues Sukuk in return for the proceeds (250
mil) from the Primary Subscriber (Rabbul Mal). (+ SPM
& Primary Subscriber agreed to sell the crude oil to 3rd
party)*
SPM buys a commodity (crude oil) from the producer on a
salam basis (within 3 months). The price is paid entirely
up-front from the sukuk certificates (250 mil).
The delivery of the commodity is set at a specified future
date (within 3 months).
SPM makes a sale promise by dealing with a beneficiary
(Bahrain Refinery – unilateral promise by Refinery) to sell
the commodity on the date when it is due to be delivered.

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ALTERNATIVES FOR MARKETING SALAM
GOODS
1) Parallel Salam
The bank, as seller, can sell the goods on Parallel
Salam on similar conditions and specifications as it
previously purchased on the first salam, without
making one contract dependent on the other.
The date of delivery in the 2nd contract can be the
same as that of the original salam, but not earlier than
that (no sale of goods which one does not own).
If the seller in the 1st salam breaches his obligation,
the buyer has no right to relate this breach/default to
the party with whom he concluded a parallel salam.

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2) Agency Contract
The bank can appoint any 3rd party or the
customer as its agent to sell the commodity in the
market.
A price can be determined in the agency
agreement at which the agent will sell the
commodity – but if the agent is able to get a
higher price, the benefit can be given to the agent.

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3) Getting Promise for Purchase
A salam purchaser may like to get a promise (refinery
promises to buy) from 3rd party (refinery) whereby the
latter will buy the commodities of specified quality at a
mutually agreed price.

The bank (promisee) may take earnest money (Hamish

Jiddiyyah*) from the promisor. If the latter backs out, the
bank will have the right to cover the actual loss from the
earnest money. (Ayyub, 2007).

- Parallel salam: Lump-sum payment in advance

- Promise for purchase: May advance only Hamish
Jiddiyyah.

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 CONDITION OF AL-SALAM
1) The jurists from various schools of thought agreed that al-Salam
is permissible as long as it observes (4Ps + 2Qs):
- Product: Types of goods are clearly stated
- Period: The duration is clearly stated
- Price: The amount of capital/price is clearly stated
- Place: The delivery place is clearly stated
- Quality: The characteristics/specifications are clearly stated
- Quantity: is clearly stated

The things whose quality or quantity is not determined by

specification cannot be sold through salam. E.g. – precious stones*
cannot be sold based on salam, because every piece of precious
stones is normally different in terms of quality, size or weight and
their specification is not generally possible.

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2) The majority of jurists (Hanafiyah / Shafiyyah / Hanabilah)
agreed upon the precise date of delivery is obligatory. No
vague time period (winter/summer). Except Malikiyyah.

3) Fully paid in advance. The seller must take possession of the

price in full before departing one another; otherwise it will be
tantamount to the sale of debt for a debt. However, Imam Malik
– Sellers may give a concession of 2 or 3 days to the buyers
(Taqi Usmani, 2005).

4) The price of Salam is normally lower than the cash &

deferred payment. The jurists agreed upon full payment by the
purchaser, so he should be given a discount price.

5) The product must not be attributed to a certain location. If

the location is easily affected by diseases or natural disaster, it
is not permissible to deal with Salam.

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6) Must not involve ribawi items from the same category
(dates for wheat). These items must be effected on the spot
basis. Paper money can be used only in payment of a price,
it cannot serve as a commodity to be sold.

7) Availability of commodity* –
Hanafi: The commodity remains available in the market
right from the day of contract up to the date of delivery.
Unavailable commodity – salam cannot be effected though
it is expected will be available at the date of delivery.
Others: Availability is not a condition for the validity of
salam. What is necessary, should be available at the time of
delivery.

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8)Time of delivery –
Hanafi/Hanbali: The time of delivery is, at least, 1
month from the date of agreement. Earlier than 1 month,
salam is not effected. Argument: Salam is allowed for the
needs of farmers/traders, then should be given enough
opportunity to acquire the commodity; less than 1 month
does not normally effect the lower price than the price in
spot sales.
Imam Malik: Should not be less than 15 days –
because the rates of the market may change within a
fortnight.
Imam Shafie: The Prophet has not specified a
minimum period for the validity of salam. The expediency
may differ from time to time and from place to place.
(Taqi Usmani, 2005).

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9) Ensuring the delivery – The buyer/financier can ask him to furnish
the security, in form of a guarantee (kafalah) or mortgage/pledge
(rahn). The guarantor may be asked to deliver the commodity. Or
the buyer/financier can sell the mortgaged property and the
proceeds can be used to realize the commodity from the market.
Imam al-Bukhari has captioned 2 chapters ‘Kafil Fi Al-Salam’ and
‘Al-Rahn Fi Al-Salam’ and reported the Prophet borrowing grain
from a Jew against the pledge of an iron armour. Ibn Hajar
explained: Imam Al-Bukhari intended to describe the permissibility
of guarantee in Salam by co-permitting Rahn and Kafil. (Ayyub,
2007). Al-Shafie: the armour also amounts to a surety in a salam
transaction. (Hassan, 1986).

10) Parallel salam has 2 separate contracts – Each one must be

independent of the other. They cannot be tied up in a manner that
the rights and obligations of one contract are dependent on the
rights and obligations of the parallel contract. Each contract should
have its own force and its performance should not be contingent on
the other.*
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 Example – ‘A’ has purchased from ‘B’ 1000 bags of
wheat to be delivered on 31 December 2016. ‘A’ can
contract a parallel salam with ‘C’ to deliver to him 1000
bags on 31 December 2016. But, the delivery of wheat to
‘C’ cannot be conditioned with taking delivery from ‘B’.
Thus, even if B did not deliver wheat on 31 December
2016, ‘A’ is duty bound to deliver 1000 bags of wheat to
‘C’. He can seek whatever recourse he has against ‘B’.

Similarly, if ‘B’ has delivered defective goods which

do not conform with the agreed specifications, ‘A’ is still
obligated to deliver the goods to ‘C’ according to the
specifications agreed with him.

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11) Parallel salam is allowed with a third party only – The
seller in the 1st contract cannot be made purchaser in the
parallel contract of salam, because it will be a buy-back
contract. (Taqi Usmani, 2005).

12) Option (Khiyar) in Salam – Jurists disallow ‘option of

condition’ (Khiyar al-Shart) in salam because it disturbs or
delays the seller’s right of ownership over the price.* –
The buyer does not have the ‘option of seeing’ (Khiyar
al-Ru`yah)**, but after taking delivery, he has the ‘option
of defect’ (Khiyar al-`Aib) and the option of specified
quality. If it not has the quality as agreed, the buyer can
rescind the sale; amount of price can be recovered without
any increase.

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DIFFERENCES BETWEEN SALAM AND CASH SALE

Salam Cash
It is necessary to fix a period for the delivery It is unnecessary.
of goods.
Sale commodity not in possession of the It cannot be.
seller can be sold.
Only commodities which can be precisely Everything that can be owned is saleable.
determined in terms of quality and quantity
can be sold.
Sale cannot take place between identical Sale is permissible to sell identical goods.
goods, (wheat for wheat).

(Mansuri, 2006)

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DIFFERENCES BETWEEN SALAM AND
MURABAHAH
SALAM
Delivery of the purchased goods is deferred;
the price is paid on the spot.
The price has to be paid in full in advance.
Salam cannot be executed in respect of
things which must be delivered on the spot,
e.g. Salam between wheat and barley.
MURABAHAH
The purchased goods are delivered on the
spot; the price may be either on the spot or
deferred.
The price may be on the spot or deferred.
Murabahah can be executed in those things.
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REFERENCES
Abdullah Alwi Haji Hassan (1986), Sales and
Contracts in Early Islamic Commercial Law, Islamic
Research Institute, Islamabad, pp. 72.
M. Tahir Mansuri (2006), Islamic Law of Contracts
and Business Transactions, Adam Publishers 7
Distributors, New Delhi, pp. 201-202.
Muhammad Ayyud (2007), Understanding Islamic
Finance, Wiley, Chichester, pp. 249, 250, 251, 252.
Suruhanjaya Sekuriti (2009), The Islamic Securities
(Sukuk) Market, Securities Commission, Malaysia,
pp. 64-65.

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Taqi Usmani, M. (2005), An Introduction to
Islamic Finance, Maktabah Ma`ariful Quran,
Karachi, pp. 187, 189-191.
Zamir Iqbal and Abbas Mirakhor (2007), An
Introduction to Islamic Finance: Theory and
Practice, Chichester, pp. 183-184.

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‫ﺟﺰاﻛﻢ ﷲ ﺧﯿﺮ اﻟﺠﺰاء‬
‫‪Thank You‬‬

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