Understanding the Duty to Mitigate Damages

If you are on the wrong end of a breach of contract–that is, you are the non-breaching party–you probably have, or are sustaining, a significant financial loss. And yes, you can sue for breach of contract to recover your financial losses that stem from that breach.

But that doesn’t always mean that you can just sit back, do nothing, allow your damages or losses to mount up, and expect to sue to recover 100% of your damages. That’s because of what is called mitigation of damages.

What Does Mitigation Mean?

Mitigation of damages means that you have a general obligation to do what you possibly can, within reason, to minimize your financial losses or to stop the financial losses from piling up. If you can avoid damages, you have a duty to do so–you can’t sit idly by and just make the breaching party pay you what you have lost.

Generally you have to do what you can within reason, to stop or minimize losses–but you don’t have to do anything extraordinary or anything unreasonable or unrealistic.

Mitigation Examples

As an example, imagine an employee says that he or she was wrongfully terminated, and the employee wants his lost salary. The employee cannot just sit home, do nothing, not seek reemployment, and expect to collect all of his lost wages–rather, the employee would have some obligation to try and find new employment, so that he or she can make a salary, and thus minimize the financial losses from the allegedly illegal termination.

Or, imagine a business that expects its door to be repaired so it can open for business. If the repair company breaches a contract and doesn’t do the job, the business can’t sit there closed, amassing financial loss. It would have to find someone else to do the job, and then sue for whatever resulting financial losses came from the original breach.

Sometimes, minimizing losses or damages comes with some expense. A party that has expenditures related to attempts to mitigate damages can ask for those damages from the breaching party.

Contracting Away Mitigation

Parties can contract away the duty to mitigate damages. So, for example, parties could enter into an agreement that says that the non breaching party has no duty to mitigate damages and that it can recover the full measure of contractual damage, regardless of mitigation.

Just be aware that if you are the one that has to breach the agreement, you may be a bit upset at having to pay full damages, when the other side could have taken reasonable measures to limit what you owe them, but did not.

In the absence of such an expressly worded and agreed to clause in a contract excusing the obligation to mitigate damages, the duty to mitigate damages exists, and a court will consider it, so long as the Defendant (the breaching party) raises mitigation as an affirmative defense.

Call our West Palm Beach business litigation attorneys at Pike & Lustig to help you in your breach of contract case.

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