FIQH MUAMALAT 

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Chapter 5: Concept Of Contract Chapter 6: Sale-Based Transactions 1 Chapter 7: Sale-based Transactions 2 Chapter 8: Mudarabah Chapter 9: Musharakah Chapter 10a: Ijarah Chapter 10b: Rhan Contract Chapter 11a: Kafalah Chapter 11b: Wakalah Chapter 12: Bay al-Dayn Chapter 13a: Wadi'ah Contract Chapter 13b: Contract of Sarf
Table of Contents ▼

    Salam Contract


    Core Concept & Definition

    Literal Meaning:
     Giving (ita) and advance (tasif).

    Technical Definition: 
    A sale contract where the seller undertakes to sell specific commodities to the buyer at an agreed future date in exchange for a price fully paid in advance on a spot basis.

    Key Parties & Terms:
    • Musallim / Rabb al-salam: The buyer (the one who pays the capital).
    • Musllam ilayhi: The seller (the one who receives the money and owes the goods).
    • Ra’s al-mal: The cash price paid in advance.
    • Musallam fihi: The purchased commodity to be delivered later.

    2. Legal Authority
    • Quran: "When you deal with each other in transactions involving future obligations... put them in writing" (Q 2:282).
    • Sunnah: The Prophet s.a.w allowed it provided there is a known volume or weight, and a known deferment.
    • Ijma’: Scholars unanimously agree it is permissible to meet people's economic needs.

    3. Essential Conditions for Validity
    To avoid Gharar (uncertainty) and Riba (usury), the following must be met:

    Price (Ra’s al-mal):
    • Must be specified and paid in full at the time of the contract.
    • If the price is a ribawi item, it cannot be exchanged for another ribawi item of the same genus to avoid Riba al-fadl and Riba al-nasiah.

    Commodity (Musallam fihi):
    • Must be tangible goods that can be measured, weighed, or counted.
    • Cannot be a "particular" item (e.g., "fruit from this specific tree") because it might not grow, leading to Gharar.
    • Must be commonly available in the market on the delivery date.

    Delivery:
    • The time of delivery must be fixed and clearly defined.
    • Deferment is generally a condition for validity (Hanafis/Malikis/Hanbalis), though the Shafi'i school allows immediate delivery.

    4. Delivery Issues & Termination

    • Non-performance: If the goods are unavailable at delivery, the buyer can either wait or cancel the contract and recover the capital.
    • Quality Discrepancies:
      • Higher quality: The buyer must accept; the seller cannot increase the price.
      • Lower quality: The buyer has the right of option to accept or reject.
    • Death:
      • If the seller dies, the contract is terminated; the buyer claims the price from heirs.
      • If the buyer dies, the contract remains operative.

    5. Types of Salam
    • Ordinary Salam: A simple two-party contract between the buyer and seller.
    • Parallel Salam: Two independent contracts; for example, a bank acts as a buyer in one and a seller in another. The two must not be contingent upon each other.

    Istisna Contract


    1. Core Concept & Definition

    Literal Meaning: Derived from the root sana, meaning to manufacture or construct something.

    Technical Definition: A sale contract to purchase something that will be manufactured or constructed later for a definite price based on agreed specifications.

    Legal Character: It is an exception to the general rule of sale, which usually requires the goods to be in the seller's physical or constructive possession at the time of the contract.


    2. Legal Authority
    • Sunnah: The Prophet s.a.w requested the manufacturing of a ring for himself.
    • Ijma’: Legitimate based on continuous customary practice of people across all periods without objection.
    • Hanafi View: Permitted based on istihsan (legal preference) because there is maá¹£laḥah (public interest) in fulfilling people’s needs.

    3. Essential Conditions of Istisna

    Subject Matter:
    • Must be clearly identified by kind, type, quality, and quantity to avoid ignorance (jahalah) which leads to dispute.
    • Must be goods that can be manufactured (e.g., aircraft, buildings) and not natural commodities like corn or fruit.
    • The manufacturer must provide the raw materials; if the buyer provides them, the contract becomes ijara (leasing/hiring).

    Price:
    • Must be known at the conclusion of the contract.
    • Unlike salam, the price does not need to be paid in full in advance; it can be deferred or paid in installments.

    Delivery:
    • The period of delivery and the place of delivery (if transportation costs are involved) must be specified.

    4. Key Prohibitions & Shariah Issues

    • Existing Assets: The subject matter must not already exist at the time of the contract.
    • Price Changes: The price cannot be adjusted due to normal fluctuations in material or labor costs.
    • Binding Nature: Once concluded, it is binding on both parties; neither can retract unless the asset fails to meet specifications.

    5. Types & Applications

    • Ordinary Istisna: A direct agreement between a buyer and a manufacturer.
    • Parallel Istisna: Two independent contracts where a bank acts as the manufacturer to the customer, and then enters a second contract as a buyer with a sub-contractor.
    • Applications: Used for high-tech industries (ships, aircraft) and infrastructure (hospitals, schools, apartments).

    Comparison of Sales Type

    Normal Vs BBA Vs Salam
    Feature Normal Sale BBA (Bai’ Bithaman Ajil) Salam (Forward Sale)
    Status of Price Present (Paid at the time of contract)  Deferred (Paid at a later date Present (Paid in full at the time of contract) 
    Status of Goods Present (Delivered at the time of contract)  Present (Delivered at the time of contract)  Deferred (Delivered at a later agreed period) 
    Legal Definition The common type of sale where both counter-values are exchanged immediately Known as deferred payment sale; subject matter is present but price is future.  A contract where the capital is paid in advance for goods delivered in the future. 
    Salam vs Istisna
    Feature Salam Contract Istisna Contract
    Subject Matter Usually commodities or natural products (wheat, fruit, oil). Limited to items that must be manufactured or constructed.
    Payment Time Price must be paid in full at the time of contract. Price can be paid later, in installments, or upfront.
    Nature of Asset Asset must be tangible and commonly available in the market. Asset is a fixed liability often made to special specifications.
    Existence of Good Forbidden to specify a "particular" farm/tree to avoid Gharar. Subject matter must not exist at the time of contract.
    Binding Nature Binding once concluded. Binding on both parties; no right to retract unless specs aren't met.
    Cancellation Can be cancelled fully or partially by mutual agreement before delivery. Generally no right to retract unless goods fail specifications.
    Time of Delivery Must be a future date (deferment is a condition) Must specify a period of delivery to avoid conflict.
    Raw Materials Supplied by the seller. Must be supplied by the manufacturer (otherwise it becomes ijara).