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Compensation by way of leniency

An ex gratia payment is a payment made voluntarily as a gesture of goodwill, without any statutory or contractual obligation to do so.

An ex gratia payment refers to compensation that a party voluntarily provides, typically in circumstances where no legal liability has been admitted. Such payments are generally made to preserve the relationship with the counterparty or to avert escalation of a dispute.

In practice, they arise in insurance matters, contractual disputes or customer complaints. They offer a pragmatic solution without formal acknowledgment of fault, thereby avoiding the need for legal proceedings.

Their relevance lies in keeping negotiations open and preventing litigation, while ensuring that the payer does not create a precedent for future claims.

“The insurer made an ex gratia payment to the customer to avoid further discussion concerning the claims handling.”

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