Islamic Contract – Bay’ al-Salam: Price (Ra’s al-Māl) in Salam Contract

Islamic Contract – Bay’ al-Salam: Price (Ra’s al-Māl) in Salam Contract 
Q1: What is ra’s al-māl
in a salam contract?
Answer
Ra’s al-māl refers to:
the purchase price or capital paid by the buyer in a salam contract.
In salam:

• the buyer pays the price immediately;
• while delivery of the commodities is deferred to a future date.

Q2: Why must the salam price be fully paid immediately?
Answer
The salam price must be:

• clearly determined; and
• fully paid at the contract session.

This rule exists to avoid:
exchange of one deferred countervalue for another deferred countervalue,
which is known as:
bay‘ al-kāli’ bi al-kāli’
(sale of debt for debt).


What Is Bay‘ al-Kāli’ bi al-Kāli’?
Explanation
It occurs when:

• both payment and delivery are deferred.

This creates excessive uncertainty and resembles prohibited debt trading.


Example of Invalid Bay‘ al-Kāli’ bi al-Kāli’
A buyer says:
“I will pay RM50,000 after 6 months for rice to be delivered after 6 months.”
Problem

• payment delayed;
• delivery also delayed.

Both obligations are deferred.
Result
❌ Invalid because it resembles sale of debt for debt.


Q3: Why must the seller receive full payment before leaving the contract session?
Answer
The seller must take possession of the salam capital immediately because:

• salam was permitted to provide immediate liquidity to producers and farmers.

If payment is delayed:

• the purpose of salam is defeated.

Immediate payment also:

• prevents uncertainty;
• distinguishes salam from prohibited debt exchanges.

Q4: Did any jurists allow slight delay in payment?
Answer
Yes.
The Māliki jurists allowed:

• minor delay of a few days,

provided:

• the delay is not stipulated as a contractual condition.

Similarly, AAOIFI allows:

• payment delay of:
  • two or three days at most
    as an exception.

Q5: Can an existing debt be used as salam capital?
Answer
No.
According to AAOIFI SS No. 10 (Para 3/1/4):
an existing debt cannot be recognised as the capital of salam.
This means:

• salam capital must involve actual payment;
• not merely set-off or conversion of existing debt.

Example of Invalid Debt as Salam Capital
A farmer owes trader:

• RM30,000 from previous transaction.

The trader says:
“I will treat that debt as salam payment for future wheat delivery.”
Problem
No actual new payment occurs.
Result
❌ Invalid salam capital according to AAOIFI.


Q6: Why are ribawi items problematic in salam pricing?
Answer
If the salam price itself is:
a ribawi item,
certain exchanges become prohibited to avoid:

• ribā al-faḍl; and
• ribā al-nasī’ah.

What Is Ribā al-Faḍl?
Occurs when:

• ribawi items of same genus are exchanged unequally.

Example:

• 1 tonne wheat exchanged for 1.5 tonnes wheat.

What Is Ribā al-Nasī’ah?
Occurs when:

• one ribawi item is delivered immediately;
• the other is deferred.

This naturally occurs in salam because:

• commodity delivery is deferred.

Example of Invalid Ribawi Salam
A buyer pays:

• wheat today
  for:
• barley delivered later through salam.

Problem
Both:

• wheat;
• barley

are ribawi food commodities.
The exchange creates risk of:

• ribā al-nasī’ah.

Result
❌ Not permissible through salam.


Q7: What are the AAOIFI requirements regarding salam capital?
Answer
According to AAOIFI SS No. 10:
1. Salam Capital Must Be Clearly Known
(Para 3/2/1)
The price must be clearly determined to:

• remove uncertainty;
• avoid disputes.

2. Salam Capital Must Be Paid Immediately
(Para 3/1/3)
Payment should occur:

• at the contract session.

Exception:

• delay of two or three days may be tolerated.

3. Debt Cannot Be Salam Capital
(Para 3/1/4)
Existing debts cannot be converted into salam payment.


Case Study 1: Valid Salam Payment
A trader enters salam contract with rice farmer.
Contract Details

• Commodity: 10,000 kg rice
• Salam price: RM80,000
• Delivery date: 1 December 2028

The trader:

• pays RM80,000 immediately during contract session.

Analysis

• Full payment immediate.
• Delivery deferred.
• Valid salam structure.

Result
✅ Valid salam contract.


Case Study 2: Invalid Deferred Salam Price
A buyer agrees:

• to pay RM100,000 after 4 months
  for:
• palm oil delivered after 6 months.

Analysis
Both:

• payment;
• delivery

are deferred.
This creates:
bay‘ al-kāli’ bi al-kāli’.
Result
❌ Invalid salam contract.


Case Study 3: Invalid Debt Conversion
A supplier owes customer:

• RM50,000.

Customer proposes:
“Use the debt as salam payment for future wheat delivery.”
Analysis

• No actual payment occurs.
• Salam capital not genuinely transferred.

Result
❌ Invalid according to AAOIFI.


Important Principle
Salam is permitted as:
an exception to normal prohibition of selling future goods.
Therefore:

• strict rules apply to reduce uncertainty and ribā.

The most important rule is:
full upfront payment of the salam capital.

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