Mitigation of Damages

Mitigation of damages refers to the obligation of a party in a contract dispute to take reasonable actions to minimize the damages caused by the other party’s breach of the contract. The principle aims to discourage parties from idly sitting by and allowing the damage to increase without making any efforts to alleviate it.

In contract law, mitigating damages will often involve making reasonable efforts to reduce losses resulting from the breach of a contract. For example, if a person is hired to perform a job, and the hiring party cancels the contract in advance of the job, the hired party is generally expected to mitigate damages by seeking similar employment elsewhere, if available.

What Does Duty to Mitigate Mean?

The duty to mitigate refers to a party’s legal responsibility to make a reasonable effort to limit the harm or losses stemming from another party’s wrongdoing or negligence. This duty can apply in a variety of legal contexts, including contract law, tort law, and employment law.

The principle behind this duty is to prevent individuals from exacerbating a situation or doing nothing to prevent further damages, then simply passing on all the costs to the party that initially caused the harm.

For landlord/tenant situations, the duty to mitigate often does apply, but the specifics can depend on local laws. For example, if a tenant breaks their lease early, the landlord generally has a duty to mitigate damages by attempting to re-rent the unit. They can’t just leave it vacant and then sue the tenant for the remaining months of rent. However, if they make reasonable efforts to find a new tenant but are unsuccessful, the original tenant may still be liable for the rent.

Keep in mind that not all jurisdictions require landlords to mitigate their damages, and the interpretation of what counts as “reasonable efforts” can vary. Consult the specific landlord/tenant laws in your jurisdiction to fully understand how the duty to mitigate might apply.

How Do Courts Calculate Damages in a Breach of Contract Case?

Courts calculate damages in a breach of contract case based on several principles. The aim is usually to put the injured party in the position they would have been in had the breach not occurred.

Here are some of the types of damages:

• Compensatory Damages: These are the most common type of damages awarded in contract breach cases. The goal of compensatory damages is to compensate the non-breaching party for losses directly caused by the breach. These damages may cover direct losses and costs (e.g., loss of goods or money) and consequential or indirect losses (e.g., lost profits).
• Liquidated Damages: These are specific damages agreed upon and written into the contract itself, to be awarded in the event of a breach. Courts will enforce liquidated damages clauses if they are a reasonable estimate of the losses likely to be caused by a breach.
• Nominal Damages: These are small amounts awarded when a breach occurs, but the non-breaching party didn’t suffer any substantial loss or harm.
• Punitive Damages: These are damages awarded to punish the breaching party for particularly egregious conduct. They are relatively rare in contract cases and more common in tort cases.

The negligence of the defendant doesn’t usually factor into the calculation of damages in a breach of contract case. This is because contract law is generally not concerned with the parties’ behavior but rather with whether the agreement was broken and what losses were suffered as a result. However, a party’s conduct could potentially factor into the decision to award punitive damages, if available under the applicable law.

What Are Common Examples of Mitigation of Damages?

A mitigation clause in a contract outlines the parties’ obligations to minimize losses in the event of a breach. Here are a few examples of scenarios that might involve mitigation of damages:

• Employment Contracts: If an employer terminates an employee without cause, the employee is usually expected to mitigate damages by seeking similar employment. If the employee finds a new job at a lower salary, the original employer might be liable for the difference.
• Lease Agreements: If a tenant breaks a lease early, the landlord is typically expected to mitigate damages by attempting to re-rent the property. If the landlord is unable to find a new tenant despite reasonable efforts, the original tenant may be responsible for the unpaid rent.
• Construction Contracts: If a contractor fails to complete a project as agreed, the property owner may be required to mitigate damages by hiring a new contractor to complete the work. The original contractor may be liable for any additional costs incurred.
• Supply Contracts: If a supplier fails to deliver goods as promised, the purchaser might be expected to mitigate damages by finding an alternate supplier. The original supplier could be liable for any price difference.

Again, the specifics of these scenarios can depend on the contract terms and the applicable law, and it’s a good idea to consult with a legal professional to understand the full implications.

How Can Failure to Mitigate Damages Be Proved?

To prove that a party failed to mitigate damages, the defendant (the party accused of causing the breach) must show that:

• The plaintiff (the party who suffered the breach) acted unreasonably in response to the breach and failed to make a reasonable effort to limit their damages;
• There were reasonable steps that the plaintiff could have taken to avoid or reduce their damages; and
• If the plaintiff had taken those steps, they would have suffered less harm.

This might involve, for instance, presenting evidence that the plaintiff had opportunities to reduce their losses but didn’t take them or that the plaintiff took actions that unnecessarily increased their damages.

What if the Plaintiff Does Not Take Reasonable Steps to Mitigate Damages?

If the plaintiff fails to take reasonable steps to mitigate damages, it can affect the amount of compensation they receive. Courts are typically less inclined to award damages that could have been avoided by reasonable action on the plaintiff’s part.

For instance, assume that in a breach of contract case, the plaintiff could have easily found a substitute for a service or goods but failed to do so. In that case, the court might reduce the damages by the amount that could have been avoided.

Do I Need a Lawyer for a Failing to Mitigate Damages?

When it comes to complex legal issues like contract breaches and the duty to mitigate damages, having an experienced contract lawyer on your side is invaluable. Contract law can be intricate and varies from one jurisdiction to another, and an attorney can help you navigate these complexities.

LegalMatch is a valuable resource for finding the right lawyer for your situation. Our platform allows you to present your case, and interested contract attorneys can respond to you. You then review each lawyer’s qualifications, experience, and proposed fee structure before choosing the best match for your needs.

If you’re facing a situation where you’re accused of failing to mitigate damages, or if you’re seeking compensation and the other party is claiming you didn’t properly mitigate, consider using LegalMatch to find a lawyer who can assist you.

Navigating the legal waters alone can be challenging, but with an experienced attorney at your side, you can be confident that your case is being handled professionally and efficiently. LegalMatch is here to help connect you with the right attorney for your legal needs.