Obligation to mitigate: Overview, definition, and example
What is the obligation to mitigate?
The obligation to mitigate refers to the legal duty of a party to take reasonable steps to reduce or minimize the losses or damages they may incur as a result of another party’s breach of contract, wrongful act, or other harmful event. This principle is common in contract law and tort law, where the injured party is required to act in good faith to limit the negative effects of the breach or wrongdoing. The obligation to mitigate prevents parties from claiming damages that could have been avoided with reasonable efforts and is intended to ensure fairness in compensating losses.
For example, if a supplier fails to deliver goods on time, the buyer has an obligation to seek alternative sources or take other reasonable actions to minimize the impact of the delay.
Why is the obligation to mitigate important?
The obligation to mitigate is important because it helps ensure that the injured party does not unnecessarily increase their own damages or losses. By requiring the party suffering harm to take reasonable steps to reduce the damage, it promotes fairness and efficiency in legal claims. This principle also prevents the party at fault from being unfairly burdened with excessive damages that could have been avoided through prompt and reasonable action.
For businesses and individuals, the obligation to mitigate serves as a reminder that both parties are expected to act responsibly and take necessary precautions to minimize losses. In legal disputes, it is used to limit compensation to what is truly unavoidable, rather than to award damages for losses that could have been mitigated.
Understanding the obligation to mitigate through an example
Imagine a company signs a contract to receive goods from a supplier, but the supplier fails to deliver on time. The company could mitigate its damages by sourcing the goods from another supplier, even if this costs a bit more, rather than continuing to wait for the original supplier to deliver. By taking this action, the company reduces the financial impact of the delay and can claim only the difference in cost, rather than the full loss from the delayed delivery.
In another example, an employee is wrongfully terminated from a job. Under the obligation to mitigate, the employee is expected to make reasonable efforts to find new employment in a timely manner to reduce the loss of income. If the employee does not actively seek new employment, the court may reduce the damages they can claim for lost wages.
An example of an obligation to mitigate clause
Here’s how an obligation to mitigate clause might appear in a contract:
“In the event of a breach by either Party, the non-breaching Party shall have an obligation to mitigate its damages by taking reasonable steps to avoid or reduce the losses resulting from the breach. Failure to take such steps may reduce the amount of damages recoverable.”
Conclusion
The obligation to mitigate is a legal principle that requires parties to take reasonable steps to reduce the damages or losses they suffer due to another party’s breach or wrongful conduct. This obligation helps ensure that damages are fair and that losses are not unnecessarily increased. For businesses and individuals, understanding the duty to mitigate can help limit exposure to excessive claims and support fairness in legal disputes. Taking reasonable action to minimize harm is essential in upholding this legal duty.
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.