Salam and Istisna

1. Salam and Istisna Faraz Younus Bandukda

2. Requirement for Sale Transaction • Existence of Subject Matter • Owner ship of subject matter • Possession of subject matter • 2 Exceptions • Salam • Istisna

3. Salam Salam is a sale whereby the seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advanced price fully paid at spot

4. Necessary Conditions for Salam • Payment of full price at initiation • Only for goods whose quality and quantity can be specified • Not on a particular product but on the variety of the product (not this packet of ajwa dates but ajwa dates) • Clearly defined quality • Clearly defined quantity • Exact date and place of delivery specified • Not for spot deliverable goods • Gold, silver, wheat, etc on both sides

5. Other Conditions • Should only be done for specialists of that products • Availability of commodity • At the time of contract • At the time of delivery • Time of delivery

6. Mode of Finance • Usually done to finance small traders and farmers • Parallel salam • Cannot be contingent on first salam • Sold at the time of delivery • Buy Back by farmer or seller not allowed

7. Istisna • Order to manufacture a particular good • Determination of Price • Determination of product specification • Can be cancelled before start of manufacturing • Specific manufactured goods are to be provided at the delivery

8. Salam VS Istisna • Salam can be effected on any goods, while Istisna should be done for goods which require manufacturing • Price in Salam should be paid completely in advance while not a necessary condition for Istisna • Istisna can be cancelled by either party before start of manufacturing • Fixing the time of delivery but should be broadly defined

9. Mode of Finance - Istisna • Parallel Istisna • Sale at Delivery • BOT transactions