9: Contract of Salam (Forward Sale) and Istisna’(Manufacture) GE20603 FIQH MUAMALAT Copyright © 2011 Mohd Zulkifli Muhammad

7/9/2016GE20603 Fiqh Muamalat2 9:Bay’ al-Salam (Forward Sale) Definition: Bay’ al-Salam: a sale of an object which is not available at the time of the conclusion of the sale, but will be delivered in the future on a fixed future date. or: a sale for an agreed price with immediate payment for a determinate thing, to be delivered in the future on a fixed date. A sale of unavailable goods which has been allowed by the based on the Hadith which allowed the sale of future goods.

7/9/2016GE20603 Fiqh Muamalat3 9:Bay’ al-Salam (Forward Sale) Legality of Forward Contract: a)Qur’an “O you who believe! When you deal with each other in transactions involving future obligations in a fixed period of time, put them in writing” [2:282]

7/9/2016GE20603 Fiqh Muamalat4 9:Bay’ al-Salam (Forward Sale) b) Hadith “Whoever enters into a forward contract, let him specify a known volume or weight, and a known term of deferment” c) Consensus of the Muslim nation (Ijma’) “All the scholars whose opinions we have memorized agreed that forward contracts (salam) are permissible, and acknowledged people’s need for this contract”

7/9/2016GE20603 Fiqh Muamalat5 9:Bay’ al-Salam (Forward Sale) Cornerstone (Arkan) of Salam Offer and acceptance Forward buyer (rabb al-salam or al- muslim) Forward seller (al-muslam ‘ilayhi) Object of forward sale (al-muslam fih) Price (capital sum) of a forward sale (ra’s mal al-salam)

7/9/2016GE20603 Fiqh Muamalat6 9:Bay’ al-Salam (Forward Sale) Condition for the price of a forward sale 1)The genus of the price-monetary form, volume or weight 2)The type of the price-specified 3)The characteristics of the price must be specified

7/9/2016GE20603 Fiqh Muamalat7 9:Bay’ al-Salam (Forward Sale) 4) Specification of the amount of the price if it is measured in volume, weight or number 5) All coins be inspected to avoid the ignorance that may lead to dispute and defectiveness of the contract 6) The payment and receipt of the price during the contract session- fungible or non-fungible

7/9/2016GE20603 Fiqh Muamalat8 9:Bay’ al-Salam (Forward Sale) Conditions for the object of a forward sale 1)That its genus is known 2)That its type is known 3)That its characteristics are known 4)That its amount is known by volume, weight, number or size 5)That the 2 compensations would not fall under surplus riba (riba al-fadl)

7/9/2016GE20603 Fiqh Muamalat9 9:Bay’ al-Salam (Forward Sale) 6) The object be identified by specification (yata’ ayyan bi-l-ta’yin) 7) The object of a forward sale be deferred 8) The object exists in the market in the specified type and characteristics-until the delivery time 9) The contract is binding 10) The location of delivery must be specified 11) The object must have the same distinguishing characteristics as the price

7/9/2016GE20603 Fiqh Muamalat10 9:Bay’ al-Salam (Forward Sale) Shafi’i conditions for forward sales 1) The conditions pertaining to the parties in forward sale=regular sale contract 2) The conditions pertaining to the language in forward sale=regular sale 3) The price must be known to both parties in quantity and description

7/9/2016GE20603 Fiqh Muamalat11 9:Bay’ al-Salam (Forward Sale) 4) There are 7 conditions for the object: (a)Characteristic can be controlled by a description (b)Genus, kind, amount & characteristic are known to both parties (c)Not a mixture of different genera (d)Object is a fungible established by description as a liability on the seller

7/9/2016GE20603 Fiqh Muamalat12 9:Bay’ al-Salam (Forward Sale) (e) Deliverable according to the specified description at the specified time (f) The term of deferment is specified precisely (g)The location of delivery is necessary- if it is not eligible as a place of delivery or the object not easily mobile

7/9/2016GE20603 Fiqh Muamalat13 9: Istisna’ (Commission to Manufacture) Definition Lexically means requesting a san’ah- the work of a small or large scale manufacturing worker A contract whereby the sale of future goods is allowed on a certain condition or conditions. A contract to purchase the item to be manufactured by the worker, where the worker provides both the raw materials as well as the labor to produce the final products specified in the contract.

7/9/2016GE20603 Fiqh Muamalat14 9: Istisna’ (Commission to Manufacture) Proof of legality The Hanafi jurists argued that reasoning by analogy (qiyas)- istisna’ is impermissible based on the Prophet’s prohibition of selling that which the seller does not have. Zufar, Malik, al-Shafi’i and Ahmad permit Istisna’- but with all the stipulated conditions.

7/9/2016GE20603 Fiqh Muamalat15 9: Istisna’ (Commission to Manufacture) The Hanafi’s jurists, on the other hand, permit istisna’ based on juristic approbation (istihsan)- due to its common usage in various time. The Messenger of Allah (pbuh) is reported to have commissioned the manufacture of a ring and a cupping.

7/9/2016GE20603 Fiqh Muamalat16 9: Istisna’ (Commission to Manufacture) Conditions of Istisna’ 1)The full delivery of the price in the contract session, with an allowance for 1 or 2 days (Maliki school) 2)The specification of the term of deferment as in the case of Salam 3)The Shafi’i ruled that the contract is valid if it satisfies the conditions of Salam

7/9/2016GE20603 Fiqh Muamalat17 9: Istisna’ (Commission to Manufacture) Appended conditions of Istisna’ 1)The specification of the genus, type, amount & characteristic of the object to be manufactured 2)The object to be manufactured is commonly traded among people 3)No specific term of deferment is specified

7/9/2016GE20603 Fiqh Muamalat18 TAKE-HOME TEST Briefly explain the differences between forward and regular sales. No. of Page: 1 Line spacing: 2.0 Font: Tahoma Font Size: 11 Date of Submission: 6 March 2007

7/9/2016GE20603 Fiqh Muamalat19 SEKIAN WALLAHU A’LAM