Contract by advance payment
2118. Purchase by advance payment means that a buyer pays the price of
a commodity, and takes its possession later. Hence, the transaction will be in
order, if, for example, the buyer says: "I am paying this amount so that I may
take possession of such and such commodity after six months", and the seller
says, "I agree", or the seller accepts the money and says: "I have sold such and
such thing and will deliver it after six months".
2119. If a person sells, on advance payment basis, coins which are of
gold and silver, and takes gold or silver coins in exchange for them, the
transaction is void. But, if he sells a commodity or money which is not of gold
and silver, and takes another commodity, or gold or silver money in exchange,
the transaction is in order if it conforms with the seventh condition of the
rule which follows. And the recommended precaution is that one should take money
and not other commodity in exchange for the commodity sold.
2120. There are seven conditions of advance payment contract:
The characteristic, due to which the price of a commodity may vary,
should be specified. However, it is not necessary to be very precise, it
will be sufficient if it can be said that its particulars are known.
Before the buyer and the seller separate from each other, the buyer
should hand over full amount to the seller, or if the seller is indebted by
way of cash to the buyer for an equivalent amount, the buyer can adjust it
against the price of the commodity, if the seller agrees to it.
And if the buyer pays certain percentage of the price of that commodity to the seller, the transaction will no doubt be valid equal to that percentage, but the seller can rescind the transaction.
The time-limit should be stipulated exactly. If the seller says that he
would deliver the commodity when the crop is harvested, the transaction is
void, because, in this case, the period has not been specified exactly.
A time should be fixed for the delivery of the commodity when the seller
is able to deliver it, regardless of whether the commodity is scarce or not.
The place of delivery should be specified. However, if that place becomes
known from their conversation, it is not necessary that its name should be
The weight or measure of the commodity should be specified. And there is
no harm in selling through advance payment contract, a commodity which is
usually bought and sold by sight.
However, for such a deal, one must be careful that the difference in the quality of individual items of the commodity must be negligibly small, like in the cases of walnuts and eggs.
If the commodity sold belongs to the category which is sold by way of
weight and measure, then it must not be exchanged for the same commodity. In
fact, as an obligatory precaution, it must not be exchanged for any other
commodity which is sold by weight and measure.
And if the commodity sold is the one which is sold by counting, then as a precaution, it is not permissible to exchange it for the same commodity in increased number.