What Is Mitigation of Damages?
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What Is Mitigation of Damages?
Mitigation of damages is a contract law concept that requires that a victim in a contract dispute to minimize the damages that result from a breach of the contract. This means that the victim is legally obligated to act in a manner that will mitigate both the effects of the breach and their own personal losses.
If a victim does not mitigate damages, the court may refuse to award any exorbitant damages that could have been reasonably avoided by the victim. The court will evaluate the victim’s actions following the breach of contract to determine if they took steps that a reasonable person in similar circumstances would have taken to minimize their losses.
However, mitigation of damages does not require the victim to take extreme steps or make substantial sacrifices in order to avoid or minimize loss.
How Do Courts Calculate Damages in a Breach of Contract Case?
The court will first look at the contract itself. The court will determine what was promised and by whom. The court will evaluate the terms of the contract. The court will also decide if a breach occurred and if so, when. If no breach occurred, the plaintiff is not entitled to damages.
The court will then estimate damages by looking at whether the contract was partially fulfilled. The court will also examine the plaintiff’s actions to determine if the plaintiff was partially responsible for the damages. If so, the damage award may be reduced.
Examples of Mitigation of Damages
To better explain mitigation of damages, here are three examples:
- A homeowner contracts with a plumbing company to fix a bathroom leak for a set price. The plumbing company begins to fix the leak but then finds a less difficult and more profitable job. The plumbing company abandons the project, therefore breaching the contract. The homeowner never hires another plumber and instead allows the leak to worsen. The house eventually develops a severe mold infestation and warped flooring. The plumbing company will not be liable for the mold infestation and warped flooring because the homeowner had a duty to mitigate damages by hiring a new company.
- A tenant needs to move for a new job and therefore breaks his lease early. He still has six months left on his lease. The landlord lets the apartment sit vacant for six months, then sues the tenant in landlord tenant court for six months of rent plus late fees and other penalty fees. The landlord will not be able to get this entire amount because the landlord had a duty to mitigate by finding a replacement tenant.
- An employee signs an employment contract with a company to work as a consultant in a non-at-will state. Due to the recession, the employer wrongfully terminates the contract after only one year. The employee then does not bother to find a new job and instead sues for lost wages. The employee will not be able to get the entirety he is asking for because he had a duty to search for a new job to mitigate his damages.
Do I Need a Lawyer for a Contract Dispute?
If you entered into a contract with someone and subsequently breached that contract, you may be liable for damages. A business lawyer can help you assess the contract, calculate damages, and determine if the plaintiff was required to mitigate damages but did not do so.
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Last Modified: 05-12-2015 06:47 PM PDT
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