Salam means advance purchase. It is a mode of business under which the buyer pays the price of the goods in advance on the condition that the goods would be supplied / delivered at a particular future time. The seller supplies the goods within the fixed time. The following conditions are essential in the contracts of Bai-Salam regarding the goods:

• Number/Quantity
• Quality
• Sample
• Price and amount of profit
• Date of supply/time limit
• Place of supply
• Who will bear the cost of supply?

Key Features

• There must be a written contract between the Bank and the client which shall be the principal instrument to govern the advance buying and selling.
• The name and description of the commodity, specification, quantity, quality, size, date, time and place of delivery, transportation cost & warehouse rent (if any) must be mentioned clearly in the contract.
• Purchase price shall be paid in advance as mentioned in the contract immediately after signing the agreement. If mentioned in the contract delivery of the commodity/product can be taken in installments also.
• If the client fails to deliver the commodity in time as per specification as well as in specified quantity, the client shall be bound to repay the price received earlier in advance against the product along with compensation for delayed period. On the other hand if the Bank receives less than the quantity contracted for, the client must pay back the value of product supplied less than the quantity contracted for.
• It is not necessary to mention cost of product and profit separately in the contract. Only purchase price of the product may be mentioned.
• Bai-Salam is the only exceptional mode allowed by Islamic Shari’ah in which subject goods can be sold without having goods in possession & existence. If the goods are ready for sale Bai-Salam is not allowed in Shari’ah.
• After taking delivery of the goods. Bank shall be the owner & shall bear all risk till delivery of the same to the purchaser.