Extract from my upcoming book, 'Ijtihad & Appying Islam in the 21st Century':
The Messenger’s approval of Sahabas ijtihad in his age:
The Sahabah (ra) used to make ijtihad in the time of the Messenger of Allah (saw) and differ in their deduction of ahkaams and the Messenger (saw) accepted this. This can be seen in the following incidents:
1- Bukhari narrated from Aisha that when the Prophet (saw) returned from the battle of khandaq (ditch) and laid down his arms and took a bath. Jibrail came and said “You have laid down your arms? By Allah, we angels have not laid them down yet. So set out for them.” The Messenger (saw) asked, “where to go?” so Jibrail pointed towards Banu Quraiza. The Prophet (saw) instructed the mu`azzin to give azan and so he announced to the people: “Whosoever hears and obeys he should not pray Asr except in Bani Qurayzah.” So they headed towards the fortresses of Bani Qurayzah, however they had different understandings of what the Messenger (saw) had said to them. Some took the literal meaning and they did not pray until they reached Bani Qurayzah after maghrib. And others took it to mean that they should go there quickly, so they prayed Asr in Madinah or on the way. When the Messenger (saw) heard about this he accepted the action of all them. [Bukhari: 894, 3810 Muslim: 3317]
2- The saying of the Prophet (saw) when he sent Mu’az as Qadi to Yemen: “By what will you pass judgement?’ He said: By the Book of Allah. The Prophet (saw) said: If you do not find it there? He said: By the Sunnah of the Messenger of Allah (saw) .He said: And if you do not find it ? He said: 'I will exercise my own ijtihad’ He (saw) said: ‘Praise be to Allah who has made the messenger of the Messenger of Allah to accord with what Allah and His Messenger loves.” [Ahmad: 5/230, Abu Dawud:3592, at-Tirmizi:1327, al-Hafiz said in his Talkhees: Ibn Tahir said: it has two lines of transmission both of which are not authentic. At-Tirmizi said: he does not know of this hadith except from this line of transmission. The isnad is not muttasil (connected throughout) but it has become well known amongst the people and their acceptance of it has strengthened it.]
3- The hadith of the Messenger (saw): “If a judge passes judgment and makes Ijtihad and he is right then he will have two rewards. And if he makes a mistake he will have one.” [Agreed upon (muttafaq a’alayh) from the hadith of ‘Amr b. al-‘Aas and Abu Hurayrah. Bukhari: 7352, Muslim: 1716.]
4- The Messenger of Allah (saw) made Sa’d b. Mu’az to judge over Bami Qurayzah so he gave the judgment that they should be killed and their offspring to be taken prisoners. The Messenger (saw) said: “You gave have given a judgment that is from above the seven arki’ah.” [Muslim:1761, Ahmad: 2/22]
From these examples we can see that the SaHabah used to make ijtihad in the time of the Messenger (saw) and that he used to accept their ijtihads and tell them that the one who got it right will get two rewards while the one who got it wrong will get one.
From Ijma as Sahaba (Consensus of the companions)
After the Messenger (saw) there are numerous and elaborate ijtihads in the time of the Sahabah. Even amongst the general masses ijtihad was widespread and that was not considered strange because they were the original arabs who spoke the pure Arabic. Once while giving a khutbah Umar b. Khattab tried to limit the dowry (mahr) but a women responded from behind the lines by quoting the ayah: “But if you intend to replace a wife by another and you have given one of them a Qintar (of gold i.e. a great amount) as Mahr, take not the least bit of it back…” [TMQ 4:20] She told him from her understanding of the word Qintar which denotes many without restriction that it is not allowed for him to restrict the doweries. He (may Allah be pleased with him) said: ‘The woman is right and Umar is wrong.’
An Ijma'a (consensus) of the Sahaba has taken place on the question of judging by an opinion which has been deduced from the Shar’ai evidence i.e. they agreed on the use of Ijtihad for any incidents that took place for which no (clear) text had been found. This is what reached us in successive reports in which there is no doubt. One such report is the saying of Abu Bakr when he was asked about the Kalala. He said: 'I will speak about it according to my opinion. If it is correct then it is from Allah. If it is a mistake then it is from me and from Shaytan and Allah has nothing to do with it. Kalala is the one who has no children or parents left.' [Amidi, Ihkam, IV, 187; Ibn al-Qayyim, I`lam, I, 177.] His statement: 'I will speak about it according to my opinion' does not mean this opinion is from him. Rather it meant Abu Bakr would express his opinion according to what he understood from the expression 'Kalala' in the verse. Kalala in the Arabic language applies to three people; the one who did not leave a child or parent, the one who is neither a child or parent (in terms of the left people), and the relatives from other than the child or father. Which of these meanings apply to the word Kalala in the verse? Abu Bakr (ra) understood it to have one of those meanings in the saying of Allah (swt):
“If the man or woman whose inheritance is in question has left neither ascendants nor descendants…” [TMQ 4:12]
Kalala is the predicate (khabar) of the verb 'to be' (kana), in this case if the man leaves no ascendants or descendants to inherit after him. Abu Bakr (ra) probably understood this also from a second verse:
“Say: "Allah directs (thus) about al-Kalala (those who leave neither descendants nor ascendants as heirs). If it is a man that dies leaving no child…" [TMQ 4:176]
From the Hadith which has been reported about the cause of the above-mentioned verse, it has been reported that the Messenger (saw) visited Jabir b. 'Abd Allah who was ill. He said: ‘I leave no ascendants or descendants (inni kalala). What shall I do with my wealth?’ Thus this verse [4:176] was revealed. This opinion stated by Abu Bakr (ra) is an Ijtihad which he did not invent from his own mind.
Another example of Ijtihad is that Abu Bakr (ra) gave a share of the inheritance to the mother’s mother and not the father’s mother. Some of the Ansar said to him: ‘you give inheritance to a woman from a deceased woman who would not inherit from her if she died. Yet you ignored a woman, who if she had died, would have inherited everything she left behind.’ So Abu Bakr (ra) gave both grandmothers equal share in the inheritance.
Abu Bakr (ra) also used to give equal grants to the Muslims. Umar (ra) said to him concerning this matter: ‘do not put those who emigrated for the Prophet and left their homes and wealth behind on an equal footing with those who embraced Islam under duress.’ Abu Bakr (ra) answered: ‘they embraced Islam for the sake of Allah, and the Dunya is nothing but a message (Balagh).’ Likewise Umar (ra) said: ‘I judge concerning the paternal grandfather (father’s father) by my opinion and say concerning it according to my opinion.’ i.e. according to his understanding of the texts. In the time of Umar (ra)’s rule a woman passed away leaving behind a husband, mother, two maternal brothers and two paternal brothers. Umar first thought that the maternal brothers should have the third as their right, but this left nothing to the paternal brothers. They approached Umar (ra) and said to him: ‘assume that our father is but a donkey (in other narrations, a stone) – are we still not of one mother?’ So Umar (ra) changed his mind and gave all the brothers an equal share in the third. This is despite the fact the Sahaba had judged differently. They had given the husband one half of the inheritance, one sixth of the inheritance was given to the mother as decreed in the text, and the final third was given to the maternal brothers, as also determined in the text, thus leaving nothing for the paternal brothers. Umar (ra) understood that the maternal brothers were brothers of the man from his mother’s side, and this applied not just to the maternal brothers but also to the paternal brothers. The mother was the common factor between them all, so when there was nothing given to the paternal brothers, their right to them was of what they deserved from the maternal brothers. The rest of the Sahaba saw it differently and they understood the text so they were able to make their own Ijtihad.
Consider the situation of what was said to Umar (ra) when a Muslim, Samra took from a Jewish merchant a tenth portion of alcohol, bottled and priced it and then sold it. So Umar (ra) said: ‘May Allah (swt) fight Samra. Does he not know that the Prophet (saw) said: ‘May Allah (swt) curse the Jews. The fat was made Haram upon them, so they ornamented it and sold it.’” In this case, Umar (ra) made the analogy between the alcohol and the fat, and that prohibition of it meant prohibition of its price.
A further example of Ijtihad is what Ali (ra) said regarding punishment (Hadd) for the crime of drinking alcohol. He said: ‘Whoever drinks it will speak nonsense, and who did so would fabricate lies, so I see that he must be punished like the fabricator of lies.’ Like Umar (ra) in the previous example, Ali (ra) made an analogy between drinking and fabrication because he understood from Shar’a that it could be considered that which is likely to happen to be the same as that which actually happens. All these are examples of Ijtihad from the time of the Sahaba and Ijma’a as-Sahaba on the issue of Ijtihad. The fact that the Companions resorted to ijtihad in the absence of a text is established by continuous testimony (tawatur). [Ghazali, Mustasfa, II, 106; Ibn al-Qayyim, I'lam, I, 176; Kassab, Adwa', p. 19.]