Ex Gratia Payment
Candlefocus EditorUnlike most other forms of payment, ex gratia payments often lack a set formula or structure and are provided from a position of good will, rather than an obligation. Depending on the context and the parties involved, the payment may often be confidential, and is exempt from taxes due to its non-negotiable nature.
Ex gratia payments are generally made in instances where there is a chance that legal liability may exist, and any attempt to compensate for damages would be legally suspect. It is an avenue to provide a generous amount of money to an individual without opening up the defendant to the legal risks associated with a contractual obligation.
In some cases, organizations such as insurers or governments may be willing to give ex gratia payments to individuals who suffered misfortune or injury due to errors or omissions by the organization. This could be seen in the case of a bank customer who suffered financial loss due to a banking error or mismanagement of funds. Without legal liability, the organization may choose to make an ex gratia payment in an effort to make amends for the wrong.
Ex gratia payments are generally made as a gesture of goodwill and to provide some measure of recompense in the absence of an admission of legal responsibility. Although this type of payment may be difficult to qualify for or prove, it can be an effective way to obtain relief or compensation without entering a courtroom.