Salam and Parallel Salam — practice questions

Correct answer: C. Clause 3/1/3: The capital of Salam must be paid immediately at the place where the contract is concluded. As an exception, payment may be delayed for two or three days at most, and even if such a short delay is stipulated it does not affect the contract, provided the delay is not equal to or greater than the delivery period of al-Muslam Fihi. Deferring the capital to delivery or paying it in instalments would make both countervalues deferred, i.e. the sale of a debt for a debt, which Salam is structured to avoid.

Correct answer: A. Clause 3/1/4: It is not permitted that a debt be recognised as the capital of Salam, such as loans or debts owed by the seller to the Institution from previous transactions. Using a receivable as capital means the capital is not actually paid, so both countervalues remain deferred (sale of debt for debt), and it may also disguise a Riba-based rescheduling of the Murabahah debt. The maturity of the receivable, the farmer’s consent or a short term do not remove this prohibition.

Correct answer: D. Clauses 3/1/1, 3/1/4 and 3/2/4: The capital may be cash, fungibles (avoiding Riba), items of material value, or the general usufruct of a particular asset such as the use of an aircraft for a period; delivery of the asset counts as immediate receipt of the capital. A debt owed by the seller cannot be capital (Clause 3/1/4), capital cannot be deferred to delivery (Clause 3/1/3), and al-Muslam Fihi may not be currency, gold or silver where the capital was paid in currency, gold or silver (Clause 3/2/4).