No mitigation: Overview, definition, and example
What is no mitigation?
No mitigation refers to a provision in a contract that limits or excludes the requirement for a party to mitigate its damages following a breach of the agreement. Generally, the duty to mitigate requires the injured party to take reasonable steps to reduce or avoid further losses that arise from the other party's breach. However, under a no mitigation clause, the party suffering the breach is not obligated to minimize its losses and may be entitled to claim the full amount of damages, even if they could have taken actions to reduce the impact of the breach.
A no mitigation clause is typically included in contracts where the parties wish to avoid a situation where one party might argue that the injured party failed to reduce the damage, thus limiting or reducing compensation. By excluding the mitigation requirement, the non-breaching party is assured that they will not bear the responsibility of minimizing their losses after the breach.
Why is no mitigation important?
The no mitigation provision is important because it provides clarity regarding the damages that may be claimed in the event of a breach. It allows the injured party to claim full compensation without the concern of having to demonstrate efforts to mitigate their damages. This can simplify legal proceedings and ensure that the non-breaching party is fully compensated for their losses, without the burden of proving that they took steps to lessen the damage.
For businesses, a no mitigation clause can provide certainty that, in the event of a breach, they will not be penalized for failing to mitigate. For the party in breach, however, this clause can expose them to greater liability, as they cannot argue that the injured party could have reduced their damages.
Understanding no mitigation through an example
Imagine a company enters into a supply agreement with a vendor to deliver materials by a specific date. If the vendor fails to deliver the materials on time, the company could suffer significant losses due to production delays. If the contract includes a no mitigation clause, the company would not be required to seek alternative suppliers or take other steps to reduce the financial impact of the delay. Instead, the company can claim full damages for the breach, without having to demonstrate efforts to minimize the losses caused by the vendor’s delay.
In another example, an individual hires a contractor to perform renovations on their home, with the project completion date set in the contract. If the contractor fails to meet the agreed timeline and the homeowner suffers financial losses due to the delay, the homeowner could claim full damages under the no mitigation clause, even if they could have found another contractor to complete the work sooner.
An example of a no mitigation clause
Here’s how a no mitigation clause might look in a contract:
“In the event of a breach of this Agreement, the injured Party shall not be required to mitigate its damages, and the Party in breach shall be liable for the full amount of the damages suffered, whether or not the injured Party could have taken steps to reduce the impact of the breach.”
Conclusion
A no mitigation clause is an important contractual provision that removes the obligation of the injured party to minimize their losses after a breach. By ensuring that the non-breaching party can claim full damages without the need to demonstrate mitigation efforts, this clause provides greater certainty and protection for the injured party. While it increases the potential liability for the breaching party, it simplifies the process for resolving disputes and guarantees compensation for the harmed party’s full losses.
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.