4

They knew what mercy is.
They knew what mercy was.

Mercy is something that always exists so can I say is as in the quoted example?

3

I think it sounds more correct to use the same tense as the subject - so, in this case

simple past

They knew what mercy was.

simple present

They know what mercy is.

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1

Mercy is something that exists always but everyone tends to understand it differently. For one person it is when you kill your wounded horse for another it is to try and heel it. It is not necessary that mercy is always the same thing even for one man. As times change, he may change his mind.

Therefore, they knew what mercy was and they could not know what it would be 10 years later.

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