Monday 26 August 2013

RATIONALE FOR SALE OF NON-EXISTENT GOODS

In general, the sale of non-existent objects/goods is prohibited due to Gharar(Uncertainty). However, to facilitate certain types of business transactions, exceptions were given through Salam and Istisna.  Many jurists have also contended that for a lawful sale transaction, it is important that the item of sale must be fully known leaving no room for ambiguity but that the physical possession by the seller is not a necessary condition of valid sale. Evidence of permissibility can be found in the Hadith narrated on the authority of ‘Ibn ‘Abbas:
The Messenger of Allah (PBUH) came to Madinah and found its inhabitants entering salam contracts (with the price paid in advance) in fruits for one, two and three years. He (pbuh) said: “whoever enters into a salam contract, let him specify a known volume or weight, and a known term of deferment”




Salam legally refers to the sale of described merchandise which under the seller's obligation and is enacted with the expression of Salam or Salaf
There are certain conditions that must be met in order for Salam to be valid;
1. That the price be put up
2. The quality of the goods be fully specified leaving no ambiguity which may lead to dispute
3. Salam can be effected only in those goods in which the quality and quantity can be specified exactly
4. The goods should be generally available in the market at the time of delivery
5. That the price of the merchandise is handed over when the agreement is made.
6. That the seller is able to deliver the merchandise when the time comes.
The jurists reasoned by comparison from the permissibility of salam to the permissibility of Istisna which may be translated as “commission to manufacture”. In Istisna, the price is paid in installment as the work progresses in manufacturing or building an otherwise non-existent object.
These two contracts are permitted as exceptions to the general rules of sale. Therefore, there are many conditions which must be met for Salam and Istisna contracts to be valid as listed above.

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