Bay’us Salam or Forward buying

Economics, Part 5-Principles of Business / Tuesday, June 8th, 2010

1. Prior to harvesting or after harvesting the crops, one gives R100 to a person and says  :    “(After two or three months) in a certain month, on a certain day, I will take wheat in exchange for this R100 which I am giving you now.” In addition to this, the person also specified the quantity of wheat that he will take in exchange for this money. This transaction is valid. He will have to give the wheat in the month and date which he had specified and at that very price which they had agreed upon. This is irrespective of whether the market value of the wheat on that specified date is more or less than the price that he had specified. Such a transaction is known as bay’us salam . In order for this transaction to be valid, there are several conditions.

Try and understand them thoroughly.

(a) The type, quality, class, etc. of the wheat (or whatever other crop one is purchasing) should be clearly mentioned so that there is no dispute when taking delivery of the item. For example, he must state  :    “You must give me a certain type of wheat. It must not be too fine nor too coarse. It must be of a high quality and not of an inferior quality. It must not be mixed with anything else such as gram, peas, etc. It must be thoroughly dried and not wet.” In short, whatever type of item he wishes to purchase, he must clearly state how it should be so that there is no dispute later. If, at that time, he did not stipulate but merely said  :    “You must give me wheat in exchange for this R100”, then this transaction will not be permissible. Alternatively, if he merely said that he must give him some husk or rice without specifying the type or quality; then this will not be permissible.

(b) The second condition is that he must also specify the weight, that for R100 he will take 10 kilos or 15 kilos or whatever the amount may be. If the person says that he must give it to him according to the market rate at that time or that he must give 2 kilos more than whatever the market rate will be at that time, this will not be permissible. The market rate will not be considered. At the time when making the agreement, the amount must be decided upon and once the stipulated date arrives, he must take the specified amount.

(c) The third condition is that he must also specify the price that he is going to pay, i.e. he is going to take the wheat for R100 or R200 or whatever the case may be. If the person does not specify this clearly but speaks in vague terms by saying that he will take some wheat for a few rands, then this is not valid.

(d) The fourth condition is that he must pay all the money at that very time and at that very place. If they agree on the entire transaction, separate and go away, and then the person comes back to pay the money, this agreement of theirs will be invalid and they will have to recommence the entire transaction. Similarly, if the person pays R50 in cash and the balance of R50 after some time, the bay’us salam will be valid in respect of the R50 and invalid in respect of the balance R50.

(e) The fifth condition is that the person must specify the time of taking delivery which must be a minimum of one month. That he will take the wheat after one month on a particular date. It is not permissible to stipulate a period less than one month. He can stipulate more than one month irrespective of how much more it may be. However, he must clearly state the month, day and date so that there is no dispute and the person does not say that he will not give it you immediately and you demand that you want it immediately. Therefore, stipulate everything beforehand. If the person does not specify the month, day and date, and instead says that once the crop is harvested you must give it, this will not be valid.

(f) The sixth condition is that the person must specify the place where he wants the wheat, either in this town or in some other town. Alternatively, he could ask the person to deliver it to his house. In short, the person should clearly state where he wishes to have the wheat delivered or collected. If the person does not specify the place it will not be valid. However, if it is an item that is light and there is no labour involved in transporting the item, e.g. a woman purchases musk or pearls, etc. then it is not necessary to mention the place. Wherever he meets the person, he can hand it over.

If the bay’us salam is executed according to the above-mentioned conditions, the transaction will be valid, if not, it will not be valid.

2. If items other than wheat and other crops are such that at the time of purchasing them they can be clearly described in order to prevent any dispute at the time of taking delivery, then bay’us salam with regard to such items will also be valid. Such items include eggs, bricks and clothes. However, all the necessary details will have to be mentioned, e.g. he will have to specify the size of the bricks, their length, their width, etc. The cloth will have to be described as to whether it is of silk, how fine or coarse it should be, etc. The eggs will have to be described as to whether they will be farm eggs or eggs produced from battery chickens, etc. In short, all the necessary details will have to be clearly mentioned so that there is no dispute later on.

3. A person purchased five bags or five baskets of husk for R100 on the basis of bay’us salam . This transaction will not be valid because you get different sizes of bags and baskets. However, if they are able to specify and agree upon a certain size or conduct the transaction by weight, it will be valid.

4. An additional condition for the validity of bay’us salam is that from the time that they conduct the transaction till the time that they specified for delivery of the item, that item must be available in the market and it must not become scarce. In the course of this time, if this item becomes absolutely scarce to such an extent that it is unavailable in the markets of this country and can only be obtained from elsewhere after much difficulty, then this bay’us salam will be invalid.

5. When conducting the transaction, the person says  :   “After the crop is harvested, in a certain month I will take the fresh wheat or, I will take the wheat that comes from a particular farm.” This is not permissible. Such a condition should therefore not be made. When the specified time approaches, the person can give the old or the fresh wheat. However, if the fresh wheat is already harvested, it will be permissible to make a condition with regard to the fresh wheat.

6. You had agreed to take wheat to the value of R100. The specified time expired and went beyond that as well and this person did not give the wheat as yet. Nor is there any hope of receiving it. In such a case it is not permissible for you to ask him not to give you the wheat and that in place of the wheat he should give you gram, rice or something else. It is not permissible to take anything else in place of the wheat. You could either give him more time in which he could give you the wheat or you could take your money back.

Similarly, if both of you annul the bay’us salam and you decide not to take the wheat and take the money back, then you cannot take anything else from him in place of that wheat. You will have to take your money back. Similarly, if the transaction becomes annulled on its own, e.g. that item has become scarce and cannot be obtained, then even in such a case you will have to take your money back. You cannot take anything else in place of the wheat. You could take your money and purchase something else with that money from him.

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