Ruling 2120. A prepayment transaction is when a person sells a commodity that has been defined in general terms for an amount that is paid immediately, and the seller hands over the commodity after some time. Therefore, if the buyer says, for example, ‘I give you this money so that after six months I take such and such commodity’, and the seller responds by saying, ‘I accept’; or if the seller takes the money and says, ‘I sell such and such commodity and I will hand it over after six months’, the transaction is valid.

Ruling 2121. If a person sells by way of a prepayment transaction a commodity made of gold or silver and accepts gold or silver money in exchange, the transaction is invalid. However, if a person sells a commodity or currency which is not made of gold or silver and takes another commodity or gold or silver money in exchange, the transaction is valid as per the details that will be mentioned in the seventh condition in the next ruling. And the recommended precaution is that in exchange for the commodity one sells, he should receive money, not another commodity.

Ruling 2122. A prepayment transaction must fulfil the following seven conditions [for it to be valid]:

1. the particulars which determine differences in the commodity’s price must be specified. A lot of precision is not necessary; it is sufficient if people would say its particulars are known;

2. before the buyer and the seller depart from each other, the buyer must pay the entire price to the seller; or, he must be owed an amount by the seller to be paid immediately, which he offsets against the commodity’s price which the seller accepts. In the event that the buyer pays only part of the price, although the transaction is valid with respect to that part, the seller can annul the transaction;

3. the period [within which the commodity must be handed over] must be precisely defined. If the seller says, ‘I will hand over the commodity by the beginning of the harvest’, the transaction is invalid because the period is not precisely defined;

4. the time for handing over the commodity must be specified such that the seller is able to hand over the commodity in that time, whether the item is scarce or abundant;

5. based on obligatory precaution, the place where the commodity will be handed over must be precisely specified. If the place is clear from the discussions of the two parties, it is not necessary to mention the name of the place;

6. the weight, measure, or number of items of the commodity must be specified. If commodities that are usually sold by viewing are sold by prepayment, there is no problem. However, as is the case with certain walnuts and eggs, the difference between the individual items of the commodity must be so small that people would not give it importance;

7. if the commodity being sold is usually sold by weight or measure, the thing that is received in exchange for it must not be of the same commodity; in fact, based on obligatory precaution, neither must it be a commodity that is sold by weight or measure. If the thing that is being sold is a commodity that is sold by number, then based on obligatory precaution, the thing that is received in exchange for it must not be an extra amount of the same commodity.