Ex gratia is a Latin term that means "out of kindness" or "as a favor." In legal and business contexts, it refers to a payment made voluntarily, without any legal or contractual obligation. The payment is made purely as an act of goodwill, sympathy, or compassion.
Key Features of Ex Gratia:
1. No Legal Obligation: An ex gratia payment is made when the person or organization is not legally bound to make it. There is no obligation under law or contract, but the payment is made out of goodwill.
2. Based on Compassion: It is usually offered in situations where someone has suffered a loss or harm, but where the payee is not legally responsible for compensating them.
3. Does Not Prevent Future Claims: Accepting an ex gratia payment does not prevent the recipient from pursuing further legal claims, as it is not an admission of liability.
Examples:
1. Company Compensation to Employees:
If an employee dies in an accident and the company is not legally obligated to provide compensation, the company may still give the employee's family a certain sum as an ex gratia payment out of sympathy.
2. Ex Gratia Payment by Insurance Company:
If an insurance claim is denied due to technical reasons, but the insurance company wants to provide some financial help to the policyholder, they may make an ex gratia payment. This would be a goodwill gesture, even though the claim is not legally valid.
Conclusion:
An ex gratia payment is a voluntary act of kindness or sympathy, made when there is no legal requirement to do so. It is often used to provide financial support in situations where the payer feels a moral responsibility, even though they are not legally bound.
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