The Essential Guide to Mitigation of Damages

In the world of civil litigation, whether dealing with a complex breach of contract or a personal injury claim, the concept of compensation is central. However, a fundamental principle of fairness in law dictates that an injured party cannot simply sit back and watch their losses mount. This is the bedrock of the doctrine of Mitigation of Damages.

This principle, sometimes referred to as the doctrine of Avoidable Consequences, is not just a strategic defense for the wrongdoer; it is a universally accepted mechanism designed to ensure that the ultimate award of damages is both reasonable and proportionate to the injury that could not be avoided. Understanding this legal requirement is crucial for anyone involved in a dispute—be it the party claiming harm or the party accused of causing it.

The Core Principle: What is the “Duty to Mitigate”?

Mitigation of damages is a fundamental legal concept in both contract and tort law. It is the obligation placed upon a claimant to take reasonable efforts to minimize the harm or financial losses they suffer due to another party’s wrongful act or breach of contract.

Crucial Distinction: While commonly called the “duty to mitigate,” it is technically not an enforceable duty owed to the breaching party. Rather, it is a legal recognition that if the claimant fails to take reasonable steps, their damages recovery will be affected by that failure. The court will reduce the final compensation by the amount that could have been avoided.

Application in Contract Law: The Business Context

In a breach of contract case, the injured party must make reasonable efforts to avoid further losses from the breach once they receive notice that the other party does not intend to perform. The overarching goal of contract law is to place the non-breaching party in the same situation they would have been in had no breach occurred.

Application in Tort and Employment Law

The duty to mitigate also applies broadly across tort law, including personal injury and employment disputes:

• Wrongful Termination: An employee who has been wrongfully terminated has a legal duty to make a diligent effort to find reasonably comparable employment. They cannot remain idle and accrue lost wages indefinitely. The employment sought must be comparable work, defined by courts as a position affording “virtually identical promotional opportunities, compensation, job responsibilities, working conditions and status”.
• Personal Injury: If an injury is sustained due to another’s negligence, the injured party is expected to seek reasonable and appropriate medical treatment in a timely manner. Failure to follow a medical expert’s reasonable recommendation may be argued by the defense as a failure to mitigate, potentially limiting recovery for any increased harm resulting from that inaction.

The Burden of Proof: An Affirmative Defense

The principle of mitigation is central to litigation strategy because it acts as an affirmative defense. This has significant implications for how a case is argued in court:

1. Plaintiff’s Burden: The injured party (plaintiff) carries the initial burden of proving the defendant’s liability and the fact and quantum of the damages suffered.
2. Defendant’s Burden: The party alleging a failure to mitigate (defendant) carries the entire burden of proof on this issue. They must prove by a preponderance of the evidence:
   • That the plaintiff failed to make reasonable efforts to mitigate.
   • That mitigation was possible and what steps the plaintiff should have taken.
   • The extent to which the plaintiff’s damages could have been avoided had those reasonable steps been taken.

Impact on Damages Recovery

Failing to mitigate damages in contract law can significantly affect how much a non-breaching party can recover. The consequence is not a complete bar to recovery for the entire claim; instead, it is a reduction of the total award. The court will only award damages for losses that could not have been reasonably avoided.

The amount recoverable is often reduced by:

Scenario	Mitigation Requirement	Damage Calculation Impact
Breach of Sales Contract	Buyer must seek a replacement supplier promptly.	The buyer recovers the difference between the contract price and the cost of the replacement goods (the cover). If they failed to cover, recovery is limited to what they would have paid for reasonable replacement goods.
Landlord-Tenant Lease Abandonment	Landlord must make reasonable efforts to re-rent the property.	The landlord’s damages are reduced by the rent they could have earned had they acted promptly to find a new tenant.
Wrongful Dismissal	Employee must seek comparable new employment.	The employer’s liability for lost wages is offset by the wages the employee earned or could have earned in comparable work.

It is also important to note that the injured party is entitled to recover the reasonable and prudent expenses and other costs incurred in taking those necessary steps to mitigate, which are often classified as incidental damages.

Potential Exceptions and Limits

While the duty is nearly universal, there are limits and potential exceptions:

• Undue Risk or Expense: The claimant is not required to accept mitigation efforts that would expose them to undue risk or expense greater than the potential recovery. Financial inability to take a required mitigating action may sometimes be considered as a factor by the courts.
• Liquidated Damages Clause: If a contract includes an enforceable “liquidated damages” clause—which sets a pre-agreed amount of damages for a breach—a court is less likely to require mitigation, as the damages amount is already fixed by the parties’ agreement.
• Offer of New Contract: A plaintiff is not required to accept a new contract offered by the breaching party if accepting it would relinquish their rights under the original contract.

Summary of the Mitigation Principle

The duty to mitigate damages is an important layer of fairness in our legal system, balancing the right to compensation with the responsibility to act reasonably after suffering harm. By understanding its requirements, both claimants and defendants can better navigate the complexities of litigation.

Key Takeaways on Mitigation

1. It is a Universal Principle: The duty to mitigate applies broadly across civil law, including breaches of contract, tort claims (like negligence and personal injury), and specific areas like landlord-tenant disputes and employment law.
2. Act Reasonably, Not Perfectly: The claimant must make reasonable efforts to minimize losses, which is a question of fact determined by the specific circumstances. They are not required to take heroic measures or incur undue risk.
3. The Burden of Proof is on the Defendant: Mitigation is an affirmative defense. The defendant must prove that the plaintiff failed to act reasonably and that the damages could have been avoided.
4. Consequence is Reduction, Not Bar: A failure to mitigate does not entirely prevent recovery. It only prevents the recovery of the specific damages that could have been avoided by reasonable effort on the claimant’s part.

Frequently Asked Questions (FAQ)

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