Bay Salam or Bai Salam, (سلم) is the Islamic contract for a forward sale whereby the purchasing party pays the full price in advance of the delivery of the asset. Salam benefits both the purchaser and the seller. The buyer, known as the rabb-us-salam, reduces the risk of having to pay a higher purchase price in the future, and the seller, or the muslam iliah, obtains their capital immediately.
The following conditions must be met:
- The asset may not be something that requires a spot sale.
- The asset much be capable of being fully specified with respect to quality and quantity.
- Full payment of the purchase price is due at the time of the sale.
- The date and place of delivery must be fully specified in the contract.
- Neither party may terminate salam unilaterally, unless the asset does not meet the agreed specifications.
The Bank enters into one contract with the customer seeking the asset and another with a third party from which the Bank will aquire the asset. The specifications of the asset and the delivery date are identical to those of initial contract.
- Shariah Opinions on Istisna, Contracting and Salam Albaraka, Jeddah