In relevance to last week’s discussion, the best way you can understand why characteristics of the Salam goods must be beyond any ambiguity and must not be diverse in content is by assuming that you have entered into a Salam contract for the purchase of five tonnes of red apples from a Dubai trader and paid him the purchase price in full.
You run an established distribution business to reputed supermarkets in the UAE and your purchases are lined-up a couple of months in advance so as to avoid any disruption which could be detrimental for your business due to intense competition.
The trader (Salam seller) specializes in importing red apples from France for several years but informs you a couple of weeks ahead of the agreed delivery date in the Salam contract that his supply line from France has been badly affected due to uninterrupted rain and flash floods in the apple-growing areas and that he needs an additional time of 1–2 months to complete the delivery under the Salam contract.
The situation is not acceptable to you since it may result in the cancelation of your various supply contracts with different supermarkets. You advise the Salam seller to arrange for local purchases from another trader who imports red apples from the US and complete the delivery under the Salam contract.
Your contract with the supermarkets is for the supply of red apples without specifying the origin whether from France or the US. The Salam seller agrees to your suggestion and makes local purchases for the Salam quantity and delivers to you the agreed tonnage of red apples and you are able to complete the required delivery to the supermarkets as per the contract.
Had the Shariah principles required that the Salam goods must be associated to a particular origin, it would not have been possible for you to save the situation since red apples from France were unavailable and some of the supermarket owners would have reconsidered the contract with you. Thus, the flexibility in the Salam principles related to Salam goods is a blessing for the Salam buyer and came to your rescue. Hope this point of non-diversity is adequately clarified.
Now let us turn to learn what parallel Salam is. The parallel Salam could be of two types.
First, if a seller under a Salam contract (let us call it ‘Master Salam’) wants to procure Salam goods from a supplier, he can enter into another Salam contract with the supplier (let us call it ‘Parallel Salam”). The specifications of the Parallel Salam shall mirror that of the Master Salam except for two aspects: the price, which shall be lower than the Master Salam, and the delivery date which shall be earlier than the Master Salam.
Interestingly, the seller under the Master Salam shall realize his profit from the transaction upfront since he will receive the sale price in advance from the buyer under the Master Salam and pass on the lower upfront payment to the seller under the Parallel Salam, retaining his profit from the transaction.
Likewise, it is permissible in Shariah that the buyer under a Salam contract (‘Master Salam’) enters into another Salam contract (‘Parallel Salam’) with another party for the sale of goods that he will receive on the agreed date under the Master Salam.
In this situation, the buyer under the terms of the Master Salam shall be able to realize upfront not only his cost (amount paid in terms of the Master Salam) but also the profit since he will sell the goods under the Parallel Salam at a profit.
However, the aforementioned flexibility is permissible in Shariah only if the two Salam contracts are treated as independent obligations without any link between them to the effect that the obligation under the Parallel Salam shall be met irrespective of the fact that the goods under the Master Salam are received by the seller under the Parallel Salam or not.
There may occur a situation whereby the goods under one of the Salam contracts are not delivered. Here the seller under the other Salam contract (Master or Parallel Salam contract) cannot wriggle out of his commitment for the timely delivery of the goods. In this situation, he will be required to purchase the goods from the market and fulfill his obligation. Here too, the aspect of non-diversity and no link to a specific origin comes to the rescue of the Salam buyer in either case.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of the Dubai Islamic Economy Development Centre, nor the official policy or position of the government of the UAE or any of its entities. The purpose of this article is not to hurt any religious sentiments either consciously or even unwittingly.
Sohail Zubairi is the projects advisor with the Dubai Islamic Economy Development Centre. He can be contacted at [email protected].
Next Week: This subject should have ended now but for a few observations needing clarification. So you get to wait one more week for the new subject.