From Islamic Law:
Reliance of the Traveler (p. 746 - 8.2) -
"Speaking is a means to achieve objectives. If a praiseworthy aim is attainable through both telling the truth and lying, it is unlawful to accomplish through lying because there is no need for it. When it is possible to achieve such an aim by lying but not by telling the truth, it is permissible to lie if attaining the goal is permissible (N:i.e. when the purpose of lying is to circumvent someone who is preventing one from doing something permissible), and obligatory to lie if the goal is obligatory... it is religiously precautionary in all cases to employ words that give a misleading impression... (See the Permissible Lying section on the
Sharia page for more)
"One should compare the bad consequences entailed by lying to those entailed by telling the truth, and if the consequences of telling the truth are more damaging, one is entitled to lie.
Notes
The Hadith makes it clear that Muslims are allowed to lie to unbelievers in order to defeat them or protect themselves. There are several forms:
Taqiyya - Saying something that isn't true as it relates to the Muslim identity. This is a Shiite term: the Sunni counterpart is Muda'rat.
Kitman - Lying by omission. An example would be when Muslim apologists quote only a fragment of verse 5:32 (that if anyone kills "it shall be as if he had killed all mankind") while neglecting to mention that the rest of the verse (and the next) mandate murder in undefined cases of "corruption" and "mischief."
Tawriya - Intentionally creating a false impression.
Muruna - 'Blending in' by setting aside some practices of Islam or Sharia in order to advance others.
Though not called taqiyya by name, Muhammad clearly used deception when he signed a 10-year treaty with the Meccans (known as Hudaibiya) which allowed him access to their city while he secretly prepared his own forces for a takeover. The unsuspecting residents were conquered in easy fashion after he broke the treaty two years later. Some of the people in the city who had trusted him at his word were executed.
Another example of lying is when Muhammad used deception to trick his personal enemies into letting down their guard and exposing themselves to slaughter by pretending to seek peace. This happened in the case of Ka'b bin al-Ashraf (as previously noted) and later against Usayr ibn Zarim, a surviving leader of the Banu Nadir tribe, which had been evicted from their home in Medina by the Muslims.
At the time, Usayr ibn Zarim was attempting to gather an armed force against the Muslims from among a tribe allied with the Quraish (against which Muhammad had already declared war). Muhammad's "emissaries" went to ibn Zarim and persuaded him to leave his safe haven on the pretext of meeting with the prophet of Islam in Medina to discuss peace. Once vulnerable, the leader and his thirty companions were massacred by the Muslims with ease, probably because they were unarmed - having been given a guarantee of safe passage (Ibn Ishaq 981, Ibn Kathir v.4 p.300).
Such was the reputation of early Muslims for lying and killing that even those who "accepted Islam" did not feel entirely safe. Consider the fate of the Jadhima. When Muslim "missionaries" approached their tribe, one of the members insisted that they would be slaughtered even though they had already "converted" to Islam (to avoid just such a demise). However, the others insisted that they could trust the Muslim leader's promise that they would not be harmed if they simply offered no resistance. (After convincing the skeptic to lay down his arms, the unarmed men of the tribe were tied up and beheaded by the missionaries - Ibn Ishaq 834 & 837).
Today's apologists often rationalize Muhammad's murder of his critics at Medina by falsely claiming that they broke a treaty with their actions. Yet, these same apologists place little value on treaties broken by Muslims. From Muhammad to Saddam Hussein, promises made to non-Muslim are distinctly non-binding in the Muslim mindset.
Leaders in the Arab world sometimes say one thing to English-speaking audiences and then something entirely different to their own people in Arabic. Palestinian leaders routinely tell Westerners about their desire for peace with Israel, even as they whip Palestinians into a hateful and violent frenzy against Jews. Yassir Arafat even referenced "Hudaibiya" - an admission to conning guillible non-Muslims.
The 9/11 hijackers practiced deception by going into bars and drinking alcohol, thus throwing off potential suspicion that they were fundamentalists plotting jihad. This effort worked so well that John Walsh, the host of a popular American television show, claimed well after the fact that their bar trips were evidence of 'hypocrisy.'
The transmission from Flight 93 records the hijackers telling their doomed passengers that there is "a bomb on board" but that everyone will "be safe" as long as "their demands are met." Obviously none of this was true, but these men, who were so intensely devoted to Islam that they were willing to "slay and be slain for the cause of Allah" (as the Quran puts it) saw nothing wrong with employing taqiyya to facilitate their mission of mass murder.
The Islamic Society of North America (ISNA) insists that it "has not now or ever been involved with the Muslim Brotherhood, or supported any covert, illegal, or terrorist activity or organization." In fact, it was created by the Muslim Brotherhood and has bankrolled Hamas. At least nine founders or board members of ISNA have been accused by prosecutors of supporting terrorism.
The notorious Council on American Islamic Relations (CAIR) is so well known for shamelessly lying about its ties to terror and extremism that books have been written on the subject. They take seriously the part of Sharia that says "it is permissible to lie if attaining the goal is permissible and obligatory to lie if the goal is obligatory". The goal being the ascendency of Islam (and Sharia itself) on the American landscape.
In 2007, CAIR's Ibrahim Hooper published an op-ed with a fabricated story about Muhammad that portrayed him as a forgiving man:
There was a lady who threw garbage in the path of the prophet on a daily basis. One day, she didn‘t do it. The prophet went to inquire about her health, because he thought she might be sick. This lady ended up converting to Islam. So, that‘s how you respond to people who attack you, with forgiveness and with kindness.
Hooper is not ignorant, of course, and knew what he was doing. After getting caught, he changed the wording slightly to say that it is a tradition "Muslims are taught," but he continues to promote the story without qualifying it as untrue - thus causing others to unwittingly repeat a lie.
Prior to engineering several deadly terror plots, such as the Fort Hood massacre and the attempt to blow up a Detroit-bound airliner, American cleric Anwar al-Awlaki was regularly sought out by NPR, PBS and even government leaders to expound on the peaceful nature of Islam.
In 2013, a scholar at the prestigious al-Azhar university decreed that Muslims may wear the cross in order to deceive Christians into thinking they are friendly. He cited 3:28 which says not to be friends with non-Muslims unless it is a way of "guarding" yourself against them.
"Hiding faith" can mean deceiving others about Islam in order to make it appear more attractive. For example, a prominent Muslim activist in the United States, Linda Sarsour, bills herself as a "progressive" and says that gays, women and religious minorities need not worry about Sharia being imposed. She even says that money is lent free of charge under Islamic law (more about that here).
The Quran says in several places that Allah is the best at deceiving people.
There are a few early Quran verses that seem to encourage truthfulness: 70:32-33, and it bears mentioning that many Muslims are no less honest than anyone else. But, when lying is addressed in the Quran, it is nearly always in reference to the "lies against Allah" - meaning the Jews and Christians who rejected Muhammad's claim to being a prophet.
Still, the circumstances by which Muhammad allowed a believer to lie to a non-spouse are limited to those that either advance the cause of Islam or enable a Muslim to avoid harm to his well-being (and presumably that of other Muslims as well). Although this should be kept very much in mind when dealing with matters of global security, such as Iran's nuclear intentions, it is not grounds for assuming that the Muslim one might personally encounter on the street or in the workplace is any less honest than anyone else.
Additional Reading:
Taqiyya: TROP's Response to the Apologists
Taqiyya about Taqiyya (Raymond Ibrahim)
Knowing the Four Forms of Lying
Muruna: Violating Sharia to Fool the West
What is Taqiyya? (David Wood Video)
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https://www.thereligionofpeace.com/pages/quran/taqiyya.aspx