Salam / Bai al Salam

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1. What is Salam?

A contract for the purchase of a commodity for deferred delivery in exchange for immediate payment according to specified conditions. 

2. Conditions for Salam:

  • The contract is concluded on goods that can’t be delivered on the spot. It is a forward sale.
  • The contract includes the price, the quantity, the quality, the detailed specifications, and the delivery date of the goods.
  • The buyer pays the full price of the goods on the day of the issuance of the contract. 
  • The buyer does not have ownership over the goods until delivery. 
  • If the buyer does not receive the goods on the due delivery date, s/he has to right to cancel the contract. 

3. Salam application (a client wants to purchase a good):

  • A client signs a Salam contract (No.1) with a bank in order to receive a certain quantity of a good on a certain date.
  • The client pays, on the spot, the full amount of the purchasing price of the good (the day of the contract’s signature).
  • The bank signs another Salam contract (No.2) with a provider/seller of the good. The bank pays the provider on the spot and expects to get the specific quantity of the good on a precise date. 
  • On the due date (of Salam contract No.2 ), the bank receives the specific quantity of the good from the provider/seller.
  • The bank sends the specific quantity of the good to the customer on the due date (of Salam contract No.1).
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