Law

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What is an Ex Gratia Payment?

Mary McMahon

Last Modified Date: January 31, 2024

An ex gratia payment is an offer of monies extended without admitting or creating liability or obligations. This term is Latin for “from favor,” an accurate description of these kinds of payments; they are made as a favor or goodwill payment in the interests of providing compensation without creating a legal tangle. When people accept ex gratia payments, they do so with the understanding that the person providing the payment is not creating a legal relationship, admitting fault for something, or accepting an obligation.

One common example of an ex gratia payment is an extra payment made to an employee when she is laid off. A company may offer benefits above those mandated by law as an expression of thanks for service or to compensate for the job loss. The company is not admitting any wrongdoing by offering this expression of goodwill, and the employee could chose to turn the payment down if there was a compelling reason to do so.

Governments sometimes provide compensation in the wake of accidents and disasters in the form of such payments. The government is not indicating that it will provide future support for people, nor is it claiming responsibility for the events. The funds are offered as an ex gratia payment to compensate people for their unpleasant experiences. Accepting such payments doesn't mean people cannot sue organizations or individuals involved.

Depending on the nature of an ex gratia payment, the money may come with a legal document people must sign. The document explains the terms of the payment, noting that the offer of money, whether it is accepted or not, does not constitute the creation of any kind of legal relationship. People should read the documentation carefully, as accepting the money may trigger clauses such as not discussing a situation publicly. If a contract is confusing or people have questions, they can request a copy for review and may take it to an attorney for a closer inspection before making a decision about what to do.

The concept of ex gratia also comes up in the sense of other legal situations where people do something voluntarily, often in the interests of benevolence or goodwill. In addition to an ex gratia payment, people can also provide information without being compelled to, or may offer services without being obliged. A phone provider, for example, might waive fees for people experiencing hardship, even though it is not required to do this.

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments

seag47

November 21, 2011

After a tornado devastated my town, we were all surprised by the generosity of the local cell phone company. The tower had been destroyed, as had most of the houses in the area, and they knew that we wouldn’t be able to use our phones there for awhile.

They offered to waive our monthly bills until they erected a new tower. They said that this would take several weeks, so they agreed to go ahead and give us one month of free cell service.

For people who had just lost everything, this was a big help. In a way, it was a payment. Even though they weren’t giving us actual money, they were allowing us to keep the money we would have spent on our bills that month.

Has anyone else ever had your fees waived by some organization because of a tragedy? I love hearing about the generosity of businesses, because it is so rare.

Oceana

November 20, 2011

I received an ex gratia payment when I was injured at work. I know that my boss wanted to be sure that I wasn’t going to sue, because I had to sign a document stating that the monetary gift didn’t mean they were to blame for the accident.

I had no intention of suing them, anyway. A machine malfunctioned, and I wound up with a broken arm because of it. It wasn’t their fault, because they had maintenance examine the equipment regularly.

I was so glad that they gave me the gift, though. I would be out of work for about six weeks to recover, and what they gave me more than covered my salary for the time missed.

cloudel

10 hours ago

@Perdido - It is extremely rare for several people to agree on something like this. Bosses are usually so tight with the company’s money that they can’t let go of any of it that they don’t legally have to part with.

There are three people in charge where I work, and they all three have to agree on major decisions. When I got laid off, I didn’t expect an ex gratia payment, because I knew that at least one of them was a serious scrooge.

One of them was very generous, though. He approached me privately and gave me a large check from his personal bank account. He told me that they had every intention of getting me back to work within a few months, and he wanted to do something to help me out in the meantime.

Perdido

23 hours ago

I didn’t know that this was called an ex gratia payment at the time, but when I had to take time off work to receive chemotherapy for cancer, the managers got together and agreed to give me a big check that would help me cover my bills and buy groceries during my time off. I didn’t expect it, and the employee handbook certainly never mentioned anything like this.

In fact, I halfway expected to be fired for needing so much time to recover. I knew that they would need someone to fill my position. So, I was pleasantly surprised when they gave me this financial gift.

They also told me that they had hired a temp to fill in for me. She fully understood that the position was only temporary.

I was overwhelmed with gratitude for these people. I vowed to myself to never forget this kind act, and I knew that I would be working there as long as I was able.