The way the rules are written, letting unarmed or defenceless foes live is considered merciful, and killing them is the opposite. The knights could have taken them prisoner, or let them go to face their fate. Every trait (not passion) is a sliding scale between two extremes - chaste / lustful, energetic / lazy, forgiving / vengeful. Taking actions strongly in line with one or the other side of the trait earns you a check to shift the scale in that direction. Until those traits reach 16 or higher, they do not govern your actions, but traits above 16 can force you to take certain actions, even if your character doesn't want to.
There is no guarantee a trait will shift when you earn a check. Come winter phase, Artaigne will spend time in reflection on his actions, and it may move his traits towards the cruel end of the spectrum. In game terms, he will make a roll to see if the trait shifts or not.
In the Arthurian tales, the actions of knights had a great impact on their personality and how they were perceived. This mechanic is intended to reflect that.
As a contrary example, had you and Rodric performed first aid on them, or left them with food and water and let them make their one way as best they could, that would have been particularly merciful and earned you a check in that direction. Killing them is considered a cruel act, and earned you a check there. Taking them prisoner, or leaving them to live or die as fate decreed is the neutral path and earns no checks.
And to clarify Cedwyn's post a bit - Cedwyn can still try to refuse a fight. But to do so he must make a die roll. Depending on that die roll he may not be able to refuse, even if the fight means certain death.