Salam Agreement

After the execution of the Salam agreement with a party, the buyer or seller executes another Salam contract with third parties. The parallel contract is only allowed with third parties. There must be two separate and independent treaties, and these two treaties cannot be committed. Bai Salam (arabic, more precisely translated as the Salami of Bai us) is an Islamic treaty in which the full payment of certain goods (often agricultural products) is made later. It is necessary that the quality of the goods that are to be purchased be fully specified, so that no ambiguity leads to litigation. Bai Salam covers almost everything that is capable of being definitively described in terms of quality, quantity and treatment. For Islamic banks, this product is an ideal product for financing agriculture, but it can also be used to finance the working capital needs of professional customers. It is one of the most popular forms of Islamic financing used by banks in Islamic countries to encourage riba-free transactions. [1] While the Malaysian Sharia Council has asked Salam to buy financial securities or shares, AAOFI does not allow any participation in Salam contracts in an extension of other raw materials, as it could be Gharar. This is because the underlying assets could change and the shares could not properly define the future because of these circumstances. Nevertheless, there are scientists who accept the application of Salam in actions, so that the actions are all similar and easily accessible or available on the market. At the time of delivery on the due date, the bank has several options to choose from: the bank receives the goods on the due date and sells it either in cash or on credit; or may authorize the seller to sell the merchandise on his behalf for a fee (or no charge); or may order the seller to deliver the goods to a third party (the buyer) in accordance with a promise to purchase beforehand, with the promise that the buyer will buy from the bank. Once the delivery is agreed by one of the above options, the merchandise is sold through a sales contract between the bank and the buyer.