Duty to mitigate: Overview, definition and example
What is the duty to mitigate?
The duty to mitigate means that if someone suffers a loss because of a contract breach, they must take reasonable steps to reduce the damage. It prevents the injured party from just letting the problem get worse and ensures they make an effort to limit the harm caused by the breach.
This doesn’t let the breaching party off the hook—they’re still responsible for the losses they caused. But it keeps things fair by requiring the injured party to act reasonably to avoid unnecessary costs.
Why is the duty to mitigate important?
The duty to mitigate is important because it ensures that losses don’t spiral out of control when they could have been avoided. For the injured party, it’s about being proactive—finding ways to reduce the impact of the breach, like hiring a replacement service or supplier. For the breaching party, it means they’re only responsible for the losses that couldn’t reasonably be avoided.
If the injured party doesn’t try to mitigate their losses, they might not be able to recover all their damages in court. Judges often consider whether reasonable steps were taken before deciding on compensation.
Understanding the duty to mitigate through an example
Imagine a business hires a contractor to deliver materials for a major project, but the contractor fails to deliver on time. The business, instead of waiting indefinitely, looks for another supplier to provide the materials, even if it costs a bit more. This effort to secure an alternative supplier demonstrates the business’s duty to mitigate its losses. If the matter goes to court, the business can claim the additional cost of the replacement materials as damages, but it can’t recover any losses that resulted from failing to act promptly.
On the other hand, if the business didn’t try to find an alternative supplier and allowed the project to fall behind, it might have difficulty recovering damages for delays that could have been prevented.
An example of a duty to mitigate clause
Here’s how a duty to mitigate clause might look:
“If a breach occurs, the non-breaching party must take reasonable steps to minimize the resulting losses. Any failure to mitigate may reduce the damages recoverable under this Agreement.”
Conclusion
The duty to mitigate ensures that both parties act fairly after a breach. The breaching party is responsible for the harm they caused, but the injured party must also take reasonable steps to limit their losses.
By understanding and acting on the duty to mitigate, businesses can reduce the impact of disputes and strengthen their position if the matter ends up in court. It’s a practical way to handle breaches responsibly while protecting everyone involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.