In the name of Allah,
The definition of Salam Contract
Salam or salaf (lit: forward payment) is the sale of an item to be delivered at a specified time in the future with the price paid in advance. Thus, Salam’ is a sale in which the buyer makes the advance payment to the seller for a deferred supply of goods.
Salam or Salaf is used interchangeably where the former is the term used in Hijaz, and the latter is the term used in Iraq (Al-Zuhaylis, 2001, p. 238).
Acceptance of Salam
The completion of the Salam contract is offer and acceptance. In the view of three schools Hanafis, Malikis, and Hanbali, the contract is established as simple as using the terms: Salam or Salaf. They also agree that Salam or Salaf and their derivatives which carry the same meaning can be used to conclude the contract. In other words, if the seller said: I ask a price X for the commodity Y to be delivered at a specified time, and the buyer says: I accept, the contract is concluded. The Shafis differ from them and puts the condition that the contract is invalid unless the term forward (Salam or Salaf) is used (Al-Zuhaylis, 2001, p. 239).
Differences between forward and regular sales
The validity of the Salam is proven by the Qur’an, Sunnah, and the consensus of scholars. However, the scholars differ on whether the Salam is like the regular sales or that it is allowed only as an exception. Most scholars are of the view that Salam is an exception. This is because, in a Salam contract, the commodity of the sale does not exist at the time of contracting. On the other hand, the minority group of scholars believes that Salam is not an exception and is consistent with the general rules of Shariah. Ibn Taymiyyah is one of the proponents of such a view (Taymiyyah, p 288).
The difference between the regular sales and the Salam contract are:
(a) In normal sales, it is not necessary to fix a period for the delivery of goods whereas in Salam it is a condition to specify the period for the delivery of goods.
(b) In a normal sale, the seller possesses the commodity for sale at the time of contract whereas, in a Salam sale, the seller does not possess the commodity for sale.
(c) In normal sale anything can be sold unless it is prohibited by the Shariah. In Salam sale, only those items can be sold, which can be determined in terms of quality and quantity.
(d) In a normal sale it is valid to sell two identical items like wheat for wheat or potatoes for potatoes. In the case of Salam sale, identical goods cannot be sold.
(e) In normal sale payment may be made later or at the time of the delivery of goods. On the contrary, full payment must be made in the Salam at the time of contract (Mansuri, 2005, p 204).
The legality of forwarding contracts
The legitimacy of the Salam contract is proven in the Quran, the Sunnah, and the consensus of the Muslim jurists. Allah says,
‘O you who believe! When you deal with each other in transactions involving future obligations in a fixed period, put them in writing” [ Quran Translation 2:282]
Ibn Abbas (R.A) who is called the mufassir of the Quran said: “I bear witness that the guaranteed lending for a known term was legalized by Allah in his Book, and thus permitted’. He then recited the verse above ( Katheer, 2000, p 446)
The prophetic tradition also approves of the legitimacy of Salam. Ibn Abbas narrated that the Messenger of Allah (PBUH) came to Madinah and found its people dealing in (salam) contracts in fruits for one, two, and three years. He (PBUH) said: ‘Whoever enters into a forward contract, let him specify a known volume or weight, and a known term of deferment’ ( Bukhari 2253)
The Muslim scholars unanimously agree on the validity of Salam sale. Ibn Al Mundhir said:
“All the scholars whose opinions we have memorized agreed that forward contracts (salam) are permissible, and acknowledged people’s need for this contract. This follows since the growers of fruits and vegetables, as well as regular merchants, need funds to spend on themselves and their plants and businesses, thus permitting forward contracts to meet their needs ( Al-Zuhaylis, 2001, p. 238).”
Advantages of Salam contract:
Salam contract benefits the seller, the buyer, and the overall economy.
Seller– One of the benefits of the Salam system to the seller is that with the advanced payment of the goods he can purchase the necessary raw material to produce those goods. This was particularly beneficial to small farmers who, after the prohibition of riba could not take loans on interest. They needed money to spend on their businesses and themselves ( Usmani, 2017, p 182)
Buyer– The benefit of the Salam system to the buyer is that they could buy goods at a much lower price below their market value.
Economy– The Salam contract is beneficial to the overall economy as well. It facilitates the increase in production, which benefits the overall economy.
The conditions of a valid Salam
For the Salam sale to be valid, scholars have laid down several conditions, which are added to the conditions of an ordinary sale. These are:
Price– The buyer must pay the full price of the commodity to the seller in advance. This is because if the price is not paid at the time of the Salam contract, it will be a sale of debt for debt which has been prohibited by the Prophet (PBUH).
Commodity– The commodity of the Salam contract must be clearly defined like genus, species, color, country of origin, and any other feature, which may influence the contract. This will also be beneficial in avoiding any dispute in the future.
The commodity must be weighable, measurable, and accountable by number. In other words, commodities such as precious stones cannot be sold in salaam. This is because every piece is distinguished from the other and thus knowing the commodity’s exact specification impossible.
The commodity for sale should not be specified such that a particular unit of farm, specific tree, or garden. This is because no certainty that produces from that tree or garden will not be destroyed before delivery.
Availability of the product at the time of delivery: The jurists differ regarding the availability of the commodity at the time of contract. Most scholars including the schools of Shafi’i, Maliki, and Hanbali believe that the availability of the commodity at the time of the contract is not necessary. They say what is necessary is that the commodity must be available at the time of delivery. The Hanafi school of Fiqh believes that the commodity of salaam must be available from the time of contract till the time of delivery.
Narrated Muhammad bin Al-Mujalid:
`Abdullah bin Shaddad and Abu Burda sent me to `Abdullah bin Abi `Aufa and told me to ask `Abdullah whether the people in the lifetime of the Prophet (ﷺ) used to pay in advance for wheat (to be delivered later). `Abdullah replied, “We used to pay in advance to the peasants of Sham for wheat, barley, and olive oil of a known specified measure to be delivered in a specified period.” I asked (him), “Was the price paid (in advance) to those who had the things to be delivered later?” `Abdullah bin `Aufa replied, “We did not use to ask them about that.” Then they sent me to `Abdur Rahman bin Abza and I asked him. He replied, “The companions of the Prophet (ﷺ) used to practice Salam in the lifetime of the Prophet, and we did not use to ask them whether they had standing crops or not ( Bukhari 2244).
Items which are to be sold on the spot: Items like Gold or barley which are emphatically prohibited in Islam cannot be sold in Salam. It is a condition that the exchange of items like gold for gold or wheat for barley must take place in the same session of the contract ( Mansuri, 2005 p 205)
All the Muslim jurists are unanimous on the principle that Salam will not be valid unless all these conditions are fully observed, because they are based on the explicit hadith of the Holy Prophet (PBUH).
The most famous hadith in this context is the one in which the Holy Prophet (PBUH) has said:
“Whoever wishes to enter into a contract of salaam, he must affect the salaam according to the specified measure and the specified weight and the specified date of delivery”.
Date and place of delivery: Scholars agree that the date and place of delivery must be mentioned in the Contract. This is based on the verse of the Quran:
“When you deal with each other in transactions involving future obligations in a fixed period” [Quran Translation 2:282], and the Prophets (PBUH) saying: “To a known term of deferment”.
Thus, we can see that Islamic guidance covers every aspect of life. This means that there is no buying, selling, trading, or anything, except there are regulations according to the Shariah. Moreover, Islamic guidelines ensure justice to the parties involved. For Example, dealing in conventional banking and insurance, alcohol, and tobacco are prohibited because, in such trade, there is a grave injustice to the parties involved and the overall society.
Al-Zuhaylis, Wahbah (2001). Al-Fiqh Al-Islam wa Adillatuh (Islamic Jurisprudence and Its Proofs) Financial Transactions in Islamic Jurisprudence, Volume 1, trans. Mahmoud A. El-Gamal, revised Muhammad S. Eissa. Damascus: Dar Al-Fikr.
Ibn Taymiyyah, Majmoo’ Fatawa, 20/288.
Mansuri, M Tahir (2005). Islamic Law of Contracts and Business Transactions.
Usmani, Taqi (2017). Salam and Istisna. In Handbook of Islamic Finance. Dubai: Ethica Institute of Islamic Finance.
Shawkani, Muhammad bin Aliy, (2019). Comprehensive Islamic jurisprudence, According to the Quraan and authentic Sunnah, trans: Abu Aisha Murtadha Salahuddin. Malaysia: Dakwah Corner Bookstore.