SALAM-Procedure

5. Selling of goods

 

It is impermissible for the buyer of goods on Salam basis to sell these before actually receiving the same, particularly in case of grains and edible items as it has been explicitly prohibited in a Hadith.

In case of other than grains and edible items, a few jurists allow to sell the same. However, as a general rule these still should be avoided.The goods sold on Salam basis are considered a liability debt in form of goods (i.e. in exact quantity and quality of the goods agreed) and not in form of cash (i.e. the cash value of such goods).

The seller is obliged to deliver the same when it is due, according to the specifications stipulated in the contract. In case, due to any reason he could not produce or grow the same, he shall buy the same from market and deliver to the buyer instead of returning the advance money.

 6.Buy-back transaction

 

Salam sale should not be accompanied with a buy-back transaction i.e. the goods purchased on Salam should not be sold back to the same customer, either under a contract, or under a business norm. It is not permissible to link the obligations under the two Salam contracts together such that the execution of the obligations of one contract is contingent on the outcome of the other.
7.Delay in the delivery of goods

No additional amount can be charged or levied on the seller if he delays in the delivery of goods. However, in such case, the sale may be cancelled and the advance amount shall be returned to the buyer.
8.Documentation of Salam

 

In Islamic Shariah permissibility of any financial transaction is dependent on the fact that whether or not the clauses of the agreement conform to the principles defined in Shariah. The bank’s Salam Agreement and other related Appendixes have been approved by the bank’s Shariah Supervisory Committee / Shariah Advisor, which are as under:

 Ø   SALAM  AGREEMENT
 

This Agreement sets out the terms and conditions upon and subject to which the bank has agreed to have the Specified subject to all terms and conditions of the agreement.
 

Ø   AGENCY AGREEMENT

A commercial bank has a diverse range of customers and bank does not possess the expertise of dealing in such a wide range of commodities. For this purpose Agency Agreement is executed between the customer and the bank to sell the Salam assets.