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 Allaah be pleased with her) reported that the Prophet (peace and blessings of Allaah 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 man’s 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 Allaah (peace and blessings of Allaah be upon him) said: ‘Lying is not permitted except in three cases: a man’s 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).