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).