Bai‘ al-salam

Definition of "Bai‘ al-salam"

A sale agreement that involves advance payment for goods that are to be delivered later. According to the general law, no sale can be affected unless the goods are in existence at the time of the bargain, but this sort of sale forms an exception to the general rule provided the goods are defined, price is paid in advance and the date of delivery is fixed. The objects of this sale are mostly fungible things and cannot be gold or silver because they are regarded as monetary values. Barring this, bai‘ al-salam covers almost all things that are capable of being definitely described as to quantity, quality and workmanship. One of the conditions of this contract is advance payment; the parties cannot reserve their option of rescinding it but the option of revoking it on account of a defect in the subject matter is allowed. It is also applied to a mode of financing adopted by Islamic banks. It is usually applied in the agricultural sector where the bank advances money for various inputs to receive a share in the crop (that the bank sells in the market). See also, parallel salam.