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 and even if the victim who suffers personal injury through no fault of his or her own has an obligation to take reasonable steps to avoid further loss, and to minimize the consequences of the injury.
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.
What Does Duty to Mitigate Mean?
Same as above, when a person suffers damages as a result of a breach of contract, he or she has the legal obligation to minimize the effects and losses resulting from the injury. The duty to mitigate works to deny recovery of any part of damages that could have been reasonably avoided.
"Reasonably avoided" has no specific definition, but generally means what a reasonable person would do under similar circumstances. If a person has a duty to mitigate damages and they do not do it, the courts will usually reduce their damages by the amount that they could have mitigated.
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.
What are Examples of Mitigation of Damages?
To better explain mitigation of damages, here are some examples in different areas of law:
- Contract Law: 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.
- Landlord/Tenant: 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.
- Employment: 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.
- Business Law: A creditor must mitigate his damages when a debtor breaches. For example, if a debtor breaches on his car loan, the creditor must mitigate by attempting to sell the car. He cannot keep the car and sue the debtor for damages.
How Can Failure to Mitigate Damages Be Proved?
The defendant has the burden to prove that the plaintiff failed to mitigate damages and must prove that the plaintiff could have avoided extra costs and damages such as failed to receive medical attention or have surgery to avoid future injuries. All the defendant has to prove is by a “preponderance of the evidence” that the plaintiff failed to reduce the costs or losses that he or she could have reasonably avoided.
What If the Plaintiff Does Not Take Reasonable Steps to Mitigate Damages?
When a plaintiff has been injured through the negligence of the defendant, the plaintiff has the duty to take reasonable steps to mitigate his or her damages. When the plaintiff fails to mitigate his or her damages and the defendant proves that the plaintiff did not take reasonable steps to reduce their losses after the injury, the court will the reduce the plaintiff’s damages by the amount that the plaintiff could of avoided or mitigated.
Do I Need a Lawyer for a Failing to Mitigate Damages?
The duty to mitigate will almost always come up in determining your right to recover damages. A local business attorney can help explain the law and your rights and prove that the plaintiff failed to reduce or mitigate their damages. Additionally, an attorney can give advice on what to do to preserve your claim.