Literally, ex gratia is a Latin term that translates to “by favor.” In modern vernacular, the term is most commonly used in legal language to mean payments or other compensation paid to an injured or aggrieved party or to persons who otherwise have little legal claim to compensation. Such payments are made without an admission of guilt or assumption of liability on the part of the payer, no matter if the payer is a private corporation or a public government entity. Rather, such payments are made out of a sense of moral obligation, in the absence of legal obligation, liability, or fault. In some cases, such payments are made to prevent a liability suit or other legal action, but primarily the reason for such monetary awards is a sense that timely compensation is the morally correct thing to do.
The practice of making ex gratia payments is common worldwide. Governments and corporations around the world have made such payments to private citizens and government employees, prisoners of war, victims of atrocities, victims of certain types of man-made disasters, and those who have suffered health problems whose suspected, albeit unproven, cause is a specific industry’s practices. Payments made in such situations are voluntary and are made out of a sense of moral responsibility or perceived obligation to members of a particular community, ethnic group, or other subset of the population.
Making an ex gratia payment can be seen, in many circumstances, to be an act of good will or good faith. For example, counties in the United Kingdom have clear policies regarding ex gratia payments made to county employees for damages to personally owned vehicles. While municipal government agencies assume no liability for loss or damage to such vehicles, in the event of malicious vandalism by unknown persons, ex gratia payments are allowed to help cover repair costs. Likewise in Bermuda, government employees deemed ineligible for pension might get special permission for ex gratia payments according to Bermuda’s Ex Gratia Payments Act of 1983.
On a more grand scale, ex gratia payments are often made because of war, atrocity, or man-made disaster. Canada, for example, offers ex gratia payments to individuals adversely affected by testing of military herbicides such as Agent Orange in the 1960s. The United States pays ex gratia payments to citizens under the War Claims Act of 1948, for those individuals who suffered violations of personal rights during World War II internments. In most countries, such as the United States and the United Kingdom, these payments are considered nontaxable as income, providing further relief to victims.