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FIQH

DEFINITION

MUAMALAH
EVIDENCE

ISLAMIC BUSINESS TRANSACTION


OBJECTIVE

CONDITION

CHAPTER TEN
DISADVANTAGES

BAY’ AL-SALAM
COMPARISON

MAHYUDDIN KHALID  emkay@salam.uitm.edu.my


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

CONDITION

DISADVANTAGES

COMPARISON

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DEFINITION
î Literally salam or salaf means pre-payment
DEFINITION
î Technically:
EVIDENCE
Ü A sale with postponed delivery of the
merchandise but immediate payment of
OBJECTIVE
the price.

CONDITION î Bay’ as-Salam or Salam means a contract in


which advance cash payment is made for
DISADVANTAGES goods to be delivered later on.
î The seller undertakes to supply some specific
COMPARISON goods to the buyer at a future date in
exchange of an advance price fully paid at
the time of contract.
î Salam- also know as sales by order.
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EVIDENCE
î Al-Quran
DEFINITION Ü .

EVIDENCE 

Ü lbnu Abbas commented that: ‘I bears the witness


that al-Salaf (Al-Salam) stipulated for a stated
OBJECTIVE term had been made legal by Allah in His holy
book and His permission is in it”. He then recites
CONDITION the above verse.

î Hadith
DISADVANTAGES
Ü Narrated by lbn Abbas: The Messenger of Allah
(s.a.w) came to Medina and the society used to
COMPARISON 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)
Ü The Prophet S.A. said, “Whoever pays money in
4 advance for dates (to be delivered later) should
EVIDENCE
î Ijma’
DEFINITION Ü Every single jurist that we came across had given
their consensus with regards to the
EVIDENCE permissibility of Bay’ Al-Salam particularly
because the product in sale is one of counter-
values in a contract (similar to the permissibility
OBJECTIVE of postponing the monetary payment which is
one of the counter — value as well).
CONDITION Ü There is also the need of the people in it. The
owners of the agricultural products and
DISADVANTAGES
businesses also needed some financing to
support themselves or to fund their crops until
the day of harvesting. Hence, it is made
COMPARISON permissible to fulfill these needs.

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NATURE OF BAY’ AL-SALAM
î Salam transaction occurs if the buyer has paid the
DEFINITION 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
EVIDENCE
to eliminate the debt.
î Salam is actually an exception from the general ruling on
OBJECTIVE the illegality of selling non—existence items (Bay’
Ma’dum) since it can achieve certain economic
CONDITION objectives, as a rukhsah (exception) and an assistance
for the people.
DISADVANTAGES
î 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.
COMPARISON

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PILLARS OF AL-SALAM
1. Al-Muslim
DEFINITION Ü The Buyer
2. Al-Muslam Ilaihi
EVIDENCE Ü The Seller
3. Al-Muslam
OBJECTIVE Ü The Price
4. Al-Muslam Fih
CONDITION Ü The Product
5. Sighah
DISADVANTAGES Ü Ijab (Offer)
Ü Qabul (Acceptance)
COMPARISON

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FLOWS OF BAY’ AL-SALAM
1) Ijab (Offer)
DEFINITION

3)
EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON 4)

2) Qabul (Acceptance)
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FLOWS OF BAY’ AL-SALAM
î Buyer A contract with Seller B to buy Product C for the
DEFINITION price of D
î Product C are not yet grown but the price D has been
EVIDENCE fixed upon them and A pays B at that moment D
amount.
î A and B agree that after 3 months that B shall deliver the
OBJECTIVE
C to A.

CONDITION

DISADVANTAGES

COMPARISON

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THE OBJECTIVES OF BAY’ AL-SALAM
1. Provide the financing for small and medium enterprises
DEFINITION Ü The economic reality underlying the contract of
Salam, the ordering of goods to be delivered
EVIDENCE later for a price paid in advance, was the
financing of the business of a small trader or
artisan by his customers.
OBJECTIVE
2. Benefits the trader or producer
Ü Provides Islamically accepted financing alternative
CONDITION and avoids any involvement in riba
3. Benefits the purchaser
DISADVANTAGES
Ü Provides goods and products at a discounted price
in return for the willingness of the purchaser to
COMPARISON help the financing of the business venture.

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CONDITIONS OF AL-SALAM
1. The jurists from various mazhab had agreed that Bay’ Al-
DEFINITION Salam is permissible provided that it specifies these
six aspects (summarized as 4 Ps + 2 Qs), which are:
EVIDENCE Ü Product: The types and kinds of goods involved in
the trade.
Ü Period: The duration of the contract and its date
OBJECTIVE
of delivery.
Ü Price: The amount of capital or price paid for the
CONDITION contract.
Ü Place: Place of delivery for the merchandise when
DISADVANTAGES it is due.
Ü Quality: The characteristics and specifications of
COMPARISON every item.
Ü 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
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delivery and not with a vague period of time.
CONDITIONS OF AL-SALAM
3. The price must be fully paid in advance without
DEFINITION exception.
Ü Any amount paid less than the amount specified
EVIDENCE would make the contract null and void.
4. The pricing under Salam would normally be lower
OBJECTIVE compared to the normal type of sale or even the
deferred payment sale.
CONDITION 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.
DISADVANTAGES
Ü The main concern behind this condition is the
capability of the trader to deliver the product
COMPARISON especially perishable items or non-
manufactured merchandise that could not
simply be produced if it is destroyed or
damaged.
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CONDITIONS OF AL-SALAM
6. The product must not be attributed to a certain area or
DEFINITION location.
Ü If it is product with possibility shortage of supply
EVIDENCE 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
OBJECTIVE an unnecessary risk (gharar).
7. Islam does not object the postponement in delivery of
CONDITION any products involved in a trading.
Ü However, it must not involve usurious or ribawi
DISADVANTAGES 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.
COMPARISON

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THE DISADVANTAGE OF BAY’ AL-
SALAM
î Bay’ As-Salam is open for exploitation to the extent that
DEFINITION 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.
EVIDENCE
î Hence, it will change something that is considered as
legal in Islam to assist traders into something that is
OBJECTIVE illegal and leads towards exploitation and destruction
in the name of Islam, which Islam has nothing to do
CONDITION with.
î To avoid and prevent any exploitation that might occur
DISADVANTAGES
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
COMPARISON the Baitul Mal to finance the maintenance of their
crops and refinance what they borrowed during the
harvesting season.

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BAY’ AL-SALAM AND BAY’ ISTISNA’
î Bay’ Al-Salam and Bay’ Al-Istisna’ are both deferred
DEFINITION delivery contract, however both instruments have its
own application.
î Salam is equivalent to a forward sales for agricultural
EVIDENCE products while,
î Istisna’ is a forward sales for manufacturing or
OBJECTIVE construction contract.
BAY’ AL-SALAM BAY’ ISTISNA’
CONDITION Salam can be effected on any The subject of Istisna is always
thing,
It no matterforwhether
is necessary Salam it that a thing which
Payment needs can be
for Istisna
DISADVANTAGES needs
the
Thepricemanufacturing
is paid
contract in fullorin
of Salam, not.
once manufacturing
made in staggered
The contract basis.
of Istisna can be
advance cannot be cancelled
effected, cancelled before the
COMPARISON unilaterally manufacturer starts the work
DIFFERENCES BETWEEN BAY’ AL-SALAM & NORMAL
SALES
BAY’ AL-SALAM ELEMENT NORMAL SALES
DEFINITION
Must specified the DURATION Does not permit any
duration of the contract time frame
EVIDENCE
and its date of delivery
OBJECTIVE

A contract in which advance cash NATURE A permanent contract


CONDITION payment is made for goods to be
delivered later on without any specified
period of expiration
DISADVANTAGES

At a discount – cheaper PRICING Market rate – based on


COMPARISON than normal pricing the ability to pay cash
Any thing, no matter it SUBJECT Physical Goods and
needs manufacturing or property
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END OF CHAPTER

DEFINITION

EVIDENCE

OBJECTIVE

CONDITION

DISADVANTAGES

COMPARISON

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