What is mitigation of damages?
Mitigation of damages requires the injured party to take reasonable steps to limit the losses caused by the other party's breach.
Mitigation is the duty to reduce losses after a breach rather than let them grow.
Where the word "Mitigation Of Damages" comes from
The duty to mitigate developed in common law as a fairness principle: an injured party cannot simply let losses grow and then bill the breaching party. Courts require reasonable efforts to reduce the harm, and damages are reduced by any loss that could have been avoided.
Why Mitigation Of Damages matters
It prevents windfalls and encourages sensible conduct after a breach. An employee who is fired must look for comparable work, and a buyer whose goods are not delivered must seek substitutes, so the breaching party pays only for losses that could not reasonably have been avoided.
Common confusion about Mitigation Of Damages
Mitigation does not require the injured party to accept unreasonable terms or ruin their reputation. The standard is what a reasonable person would do, not a perfect response, so a wronged party need not take every conceivable step, only reasonable ones.
A real-world example of Mitigation Of Damages
Your tenant breaks the lease with six months left. You must try to re-rent the unit promptly, and the tenant owes only the rent you could not recover after reasonable efforts to find a replacement.
A worked example of Mitigation Of Damages
A manufacturer cancels a large order after a retailer has already committed to buy materials. The retailer must try to sell the materials to other buyers, and the damages are reduced by whatever is recovered. If the retailer simply stores the materials and does nothing, the court will reduce the claim by the amount a reasonable effort would have produced, which is why documenting your mitigation steps is essential to maximizing recovery.
How Mitigation Of Damages works in practice
After a breach, act quickly to limit losses and keep records of every step you take. If you are the breaching party, argue that the other side failed to mitigate, because that can cut the damages substantially. In drafting, consider adding a clause that defines the injured party's duty to mitigate, and remember that mitigation does not apply if the breach was complete and nothing could have been done.
Questions about Mitigation Of Damages
Must I find a new job after being wrongly fired?
Generally yes, to mitigate lost wages.
Who pays for mitigation costs?
Often the breaching party, as part of damages.
What if I cannot mitigate?
Then you may recover the full loss.
Does mitigation apply to property?
Yes — a landlord must try to re-rent a vacated unit.