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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 a period of time. Therefore, if the buyer says, for example, ‘I give you this money so that after six months I will 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.