It is reported:
A man praised another man in front of the Prophet (sws). The Prophet said to him: Woe to you, you have cut off your companion’s neck, you have cut off your companion’s neck, repeating it several times and then added: Whoever amongst you has to praise his brother should say: I think that he is so and so, and Allah knows exactly the truth, and I do not confirm anybody’s good conduct before Allah, but I think him so and so, if he really knows what he says about him. (Abū Da’ūd, Kitābu’l-Adab)
Should then we refrain from praising our friends?
This Hadith does not mean that a person should not praise his friends. It only tells us that we must not be categorical in praising people; rather we should be very humble in praising them -- for we laud a person on the basis of his deeds and outward actions; we have no knowledge of his intentions. A good deed may look good on the surface whilst if its motives are known one may have the contrary opinion. It is only Allah who knows these motives and only He has the right to speak authoritatively; as far as we are concerned we must be careful and humble in this regard. As the words of the hadīth say, we should begin our praise with the expression ‘I think that ...’. Obviously this is not an absolute form of praise, and has a ring of humility and modesty about it.