Salam and Istisna – Background

It is one of the basic conditions for the validity of a sale in Shariah that the commodity (intended to be sold) must be in the physical or constructive possession of the seller. This condition has three ingredients:

-       Firstly, the commodity must be existing; therefore, a commodity which does not exist at the time of sale cannot be sold. 

-       Secondly, the seller should have acquired the ownership of that commodity. Therefore, if the commodity is existing, but the seller does not own it, he cannot sell it to anybody. 

-       Thirdly, mere ownership is not enough. It should have come in to the possession of the seller, either physically or constructively. If the seller owns a commodity, but he has not taken its delivery himself or through an agent, he cannot sell it.

There are only two exceptions to this general principle in Shariah. One is salam and the other is istisna’. Both are sales of a special nature, and in the present chapter the concept of these two kinds of sale and the extent to which they can be used for the purpose of financing will be explained.

Source: Introduction to Islamic Finance. Republished with the kind permission of Sheikh Muhammad Taqi Usmani.