The importance of being truthful
Question

What is the importance of being truthful, both in personal and business relationships, in Islam? Is lying ever considered and "acceptable" action?
Praise be to Allah.Being truthful means speaking the truth and also saying things that reflect reality.
Being truthful is one of the necessities of a human society, one of the virtues of human behaviour, and brings great benefits, whilst lying is one of the major elements of corruption in human society, and the cause of the destruction of social structure and ties, one of the most evil features of bad conduct, and causes widespread harm. Hence Islam commanded truthfulness and forbade lying.
Allah says (interpretation of the meaning):
O you who believe! Be afraid of Allah, and be with those who are true (in word and deeds). [al-Tawbah 9:119]
Ibn Katheer (may Allah have mercy on him) said (2/414): It means: be truthful and adhere to truthfulness, and you will be among its people and will be saved from calamity, and this will make a way out for you from your problems.
Allah says (interpretation of the meaning):
if they had been true to Allah, it would have been better for them. [Muhammad 47:21]
Abd-Allah ibn Masood (may Allah be pleased with him) said: The Messenger of Allah (peace and blessings of Allah be upon him) said: You must be truthful, for truthfulness leads to righteousness and righteousness leads to Paradise. A man will keep speaking the truth and striving to speak the truth until he will be recorded with Allah as a siddeeq (speaker of the truth). Beware of telling lies, for lying leads to immorality and immorality leads to Hellfire. A man will keep telling lies and striving to tell lies until he is recorded with Allah as a liar.
(Reported by Muslim, 4721)
This hadeeth indicates that truthfulness leads to righteousness (al-birr), an all-embracing concept that includes all kinds of goodness and different kinds of righteous deeds. Immorality is basically an inclination towards deviation from the truth, and the immoral person (faajir) is one who is inclined to turn away from the path of guidance. Hence immorality and righteousness are diametrically opposed.
Al-Hasan ibn Ali ibn Abi Taalib (may Allah be pleased with them both) said: I memorized from the Messenger of Allah (peace and blessings of Allah be upon him): Leave that which makes you doubt for that which does not make you doubt, for truthfulness is certainty and tranquillity, whilst lying is doubt and confusion.
(Reported by al-Tirmidhi, 2520; al-Nisaa'i, 8/327; and Ahmad, 1/200)
In the lengthy hadeeth of Abu Sufyaan describing his meeting with Heraclius, Abu Sufyaan (may Allah be pleased with him) said: [Heraclius] said, What does he [meaning the Prophet (peace and blessings of Allah be upon him] command you to do? I said, He says: worship Allah alone and do not associate anything in worship with Him, and abandon that which your forefathers did. He commands us to pray, to be truthful, to be chaste and to uphold the ties of kinship.
(Reported by al-Bukhaari, 1/30 and Muslim, 1773).
Hakeem ibn Hizaam (may Allah be pleased with him) reported that the Prophet (peace and blessings of Allah be upon him) said: Two parties to a deal have the option of changing their minds until they part; if they are open and honest, their deal will be blessed, and if they conceal and tell lies, the blessing of their deal will be diminished.
(Reported by al-Bukhaari, 4/275 and Muslim, 1532.)
Truthfulness includes being truthful towards Allah by worshipping Him sincerely; being truthful towards ones own soul by making it adhere to the laws of Allah; and being truthful with people in one's words and by keeping one's promises, and in dealings such as buying, selling and marriage, so there should be no deceiving, cheating, falsifying or withholding of information. Thus a person should be the same on the inside and the outside.
As regards lying, it is highly forbidden, and is of varying degrees of abhorrence and sin. The most obnoxious form of lying is falsely attributing things to Allah and His Messenger, because this involves fabrication about the religion and is an act of outrage against Allah. Hence one of the characteristics of the Prophet (peace and blessings of Allah be upon him) is that he truthfully conveyed that which Allah commanded him to convey. So Allah said (interpretation of the meanings):
who does more wrong than one who invents a lie against Allah, to lead mankind astray without knowledge. Certainly Allah guides not the people whi are zaalimoon (polytheists and wrong-doers, etc.) [al-Anam 6:144]
And who does more wrong than he who invents a lie against Allah? Such will be brought before their Lord, and the witnesses will say, These are the ones who lied against their Lord! No doubt! The curse of Allah is on the zaalimoon (polytheists, wrong-doers, oppressors, etc.). [Hood 11:18]
Equally bad is lying about the Prophet (peace and blessings of Allah be upon him), as he is reported to have said in the mutawaatir hadeeth: Whoever lies about me deliberately, let him take his place in Hell.
(Agreed upon).
The basic rule with regard to lying is that it is not permitted, but there are certain circumstances in which Islam permits lying to serve a greater purpose or to prevent harm.
One of these situations is when a person mediates between two disputing parties in order to reconcile between them, if reconciliation cannot be achieved in any other way. Um Kalthoom (may Allah be pleased with her) reported that the Prophet (peace and blessings of Allah be upon him) said: He is not a liar who reconciles between people and conveys something good or says something good.
(Reported by al-Bukhaari, 2495).
Another example is a mans speaking to his wife, or a woman speaking to her husband, with regard to matters that will strengthen the ties of love between them, even if that is accompanied by exaggeration. Asma bint Yazeed said: The Messenger of Allah (peace and blessings of Allah be upon him) said: Lying is not permitted except in three cases: a mans speaking to his wife to make her happy; lying at times of war; and lying in order to reconcile between people.
(Reported by al-Tirmidhi, 1862; he said: it is a hasan hadeeth. See also Saheeh Muslim, 4717).
One of the most important forms of both being truthful and lying is in the area of promises and covenants. Being truthful in promises and covenants is one of the characteristics by which the believers are known. Both promises and covenants involve saying something about an issue to confirm that you will do it, especially with regard to one's duties towards Allah. Allah says, praising some of His slaves (interpretation of the meanings):
Those who are faithfully true to their amaanaat (all the duties which Allah has ordained, honesty, moral responsibility and trusts, etc.) and to their covenants. [al-Muminoon 23:8]
and who fulfil their covenant when they make it [al-Baqarah 2:177]
Among the believers are men who have been true to their covenant with Allah [i.e., they have gone out for jihad (holy fighting), and showed not their backs to the disbelievers], of them some have fulfilled their obligations (i.e., have been martyred), and some of them are still waiting, but they have never changed [i.e., they never proved treacherous to their covenant which they concluded with Allah] in the least. [al-Ahzaab 33:23]
We ask Allah to make us sincere and truthful in word and deed. And Allah knows best.