Quick answer
Town Gratitude, Happiness and Town Quality are three different things.
Town Gratitude is an inventory item. Using one gives +5 Happiness.
Happiness is the smiley-face resource. Sermons use it, one point per parishioner.
Town Quality is the hard maximum for your Happiness.
If Town Quality is 10 and you already have 8 Happiness, using Town Gratitude only gives you 2; the other 3 points are lost.
The best time to use Town Gratitude is usually right after a sermon, when Happiness has been spent and there is room below the cap.
Town Quality does not rise merely because you repaired a house. House repairs give 
Green Scrolls; give those to 
Linda → New people. Each Green Scroll adds +1 Town Quality.
Why does everyone call this "Town Gratitude"?
Because several related systems are easy to mix together.
You see:
smiley orbs entering the HUD;
Town Quality;
smiley rewards in trade;
Happiness from Town Orders;
and community guides start using one word for all of them.
For sermons, the distinction matters.
Town Gratitude
A physical inventory item.
You decide when to consume it.
Happiness
Your current pool of happy townspeople.
It is what sermons actually spend.
Town Quality
The maximum Happiness capacity.
Understanding those three values solves most questions like:
“Why didn't Gratitude increase?”
“Why can only 10 people attend?”
“Why did some smileys disappear?”
What does a Town Gratitude item do?
One item gives:
+5 Happiness
It does not expire.
You can keep several in your bag indefinitely and use them when there is room under your cap.
That makes Town Gratitude more valuable as stored Happiness than as something to click automatically the moment a quest rewards it.
What is Happiness?
Happiness is used only by sermons.
Attendance is:
Parishioners = min(Happiness, Church Quality)
Starting the sermon then spends:
1 Happiness per parishioner
Example:
Happiness = 12
Church Quality = 20
→ 12 parishioners attend
→ 12 Happiness is spent
Happiness does not naturally decay over time.
The normal sink is your weekly sermon.
For attendance problems, see How to Get More Parishioners.
What is Town Quality?
Town Quality is the hard ceiling for Happiness.
If:
Town Quality = 10
you cannot store more than:
10 Happiness
Even if a quest tries to reward 20.
Anything above the cap is discarded.
That is why consuming Town Gratitude while the bar is full is wasteful.
How overflow works
Suppose:
Town Quality = 10
Happiness = 8
You use Town Gratitude:
+5 Happiness
Only two points fit.
Result:
Happiness = 10
3 points lost
There is no hidden overflow bank.
The extra is gone.
When should you use Town Gratitude?
Usually:
after a sermon.
The sermon just spent Happiness, creating room.
Example:
before sermon:
10/10
after sermon:
0/10
use Town Gratitude:
5/10
You keep the full reward.
If you own several items but Town Quality is low, keep the extras for later rather than overflowing the cap.
Where do Town Gratitude items come from?
Many quests reward them directly.
Early examples include:
Planted and Delivered;
Two Peas in a Pod;
Jack in a Boat;
Fighting Spirit Required;
battle-related progression;
fishing quests;
Town stories.
The opening chapters give you many Gratitude items.
Treat them as a portable Happiness reserve, not a tutorial collectible.
Can you buy Town Gratitude?
Januarius can also stock Town Gratitude as his trader progression advances.
Buying one can be useful when the sermon is close and your Happiness is empty.
Do not buy it simply to consume it against a full cap.
Burial Certificates also give Happiness
Selling Burial Certificates to Januarius can reward both:
For early 
Burial Certificate I:
each eligible certificate gives 1 Happiness;
up to 5 of that certificate type count per week.
The trader also has an overall weekly Happiness cap.
Once a limit is reached, he still buys certificates for money, but you stop receiving smileys.
Why did the sixth certificate stop giving Happiness?
Because there are two limits:
- 1
weekly limit for that specific good;
- 2
weekly Happiness cap for the trader.
Reaching either stops the Happiness reward while normal money trading continues.
The weekly counters reset on Pride day.
See Days of the Week.
Herm can also provide Happiness
Some goods sold to 
Herm contribute Happiness.
At the early tier this includes 
River Fish Fillets.
Later shop progression expands the eligible goods.
This system supports fractional Happiness internally.
The HUD only awards a visible point when the trader's running total crosses a whole number.
So selling one eligible item without seeing a smiley immediately does not necessarily mean it failed.
What happens to fractional progress?
If Pride reset arrives before the running fraction becomes a full point, the remainder is lost.
You do not need to micromanage every decimal, but this explains why trader rewards do not always appear item by item.
Can you buy something back and resell it for Happiness?
Do not build a farming loop around that.
Goods sold and bought back in the same trade do not count as normal Happiness generation.
Recent patches have also been fixing item duplication and economic exploits.
Use genuine eligible goods.
Town Orders give Happiness
Once the Port Warehouse opens, Town Orders become a large repeatable source.
The loop is:
- 1
- 2
- 3
- 4
- 5
receive the Happiness reward.
Later orders can provide far more Happiness than early single-item trading.
See How Town Orders Work.
Why doesn't more Happiness increase my cap?
Because Happiness is the contents; Town Quality is the container.
If you are at:
10 / 10
another Gratitude item cannot solve the problem.
You need more Town Quality.
That leads to Green Scrolls.
How to get Green Scrolls
Repair residential houses in Town.
Important:
shops are a separate system;
the repair itself does not directly increase Town Quality.
A repaired house gives you Green Scrolls.
Those are then converted into Town Quality through Linda.
How Green Scrolls raise Town Quality
After Port progression, Linda handles new settlers.
Her dialogue includes:
New people
Give her Green Scrolls.
Each one adds:
+1 Town Quality
For example:
5 Green Scrolls
→ +5 Town Quality
That also raises your maximum Happiness by five.
The real chain is:
repair houses
→ Green Scrolls
→ Linda / New people
→ Town Quality
→ higher Happiness cap
→ more parishioners
When does Linda accept Green Scrolls?
Normally, New people is available on Lust day.
There is one exception: when the system is first introduced by her quest, the menu opens immediately regardless of day.
After that, use Lust day.
If the option is grey on another day, nothing is broken.
Linda reputation controls batch sizes
Early New people options open gradually.
At first you can bring:
1 new person;
3 new people.
Later you unlock:
10;
another 10;
repeatable larger options.
Each recruited person corresponds to one Green Scroll and +1 Town Quality.
If you own scrolls but the larger option is missing, continue Linda's quests and reputation.
Why didn't repairing a house raise Town Quality?
Because the repair awards the scroll, not direct quality.
Check your inventory.
If a Green Scroll appeared, the repair worked.
Take it to Linda and use New people.
Early Town Quality
In the early game, Town Quality passes through story-defined thresholds.
After Certificate, Please, the cap becomes 10.
Reaching the Port adds more through story progression.
After that, repaired houses → Green Scrolls → Linda become the main controllable growth route.
This is why sermons can stay capped at 10 parishioners even after the Church itself is much larger.
Town Gratitude vs trader Happiness
They complement each other.
Town Gratitude
Stored, controllable Happiness.
Save it for empty space.
Trader Happiness
Repeatable weekly income.
Use weekly caps before Pride resets them.
Town Orders
Large repeatable rewards later.
A good weekly loop looks like:
after sermon
→ consume some stored Gratitude
→ sell eligible goods during the week
→ complete Town Orders
→ reach the next sermon with a full Happiness pool
How to stop wasting Happiness
Use these rules:
- 1
- 2
do not consume +5 when only 1–2 points fit;
- 3
- 4
use trader weekly caps before Pride reset;
- 5
raise Town Quality before massively overbuilding Church Quality;
- 6
Why is Church Quality 50 useless at Town Quality 20?
Because:
Happiness <= Town Quality
so:
Happiness <= 20
and:
Parishioners = min(Church 50, Happiness <= 20)
Maximum attendance remains:
20
Another 20 Church Quality gives no extra seats until the Town grows.
Town restoration is therefore part of Faith progression.
Town Gratitude and fishing
The Port Fisherman quest chain rewards Gratitude as you progress through:
The final stage also awards the 
Pro Rod.
Fishing is therefore useful for both equipment and Church economy.
See Fishing Guide.
Town Gratitude and battles
Many major battles also award Town Gratitude.
Early fights can simultaneously provide:
Combat progression therefore opens the Town while helping fund future sermons.
See Defender’s Emblem and Victory Banner.
FAQ
Are Town Gratitude and Happiness the same?
No. Town Gratitude is an item that gives +5 Happiness.
Why did my item give fewer than five points?
You hit the Town Quality cap; overflow was lost.
Does Happiness decay?
No. Sermons are the main thing that spends it.
When do trader Happiness limits reset?
On Pride day.
How do I increase Town Quality?
Repair houses → get Green Scrolls → give them to Linda through New people.
When can Linda take Green Scrolls?
Normally on Lust day.
Do shops give Green Scrolls?
Residential house repairs are the Green Scroll source. Shops are separate.
