Duty to Mitigate Damages
What is the Duty to Mitigate Damages?
A non-breaching party has a duty to take reasonable steps to minimize the losses resulting from a breach of contract and cannot recover damages that could have been reasonably avoided.
Source: Rockingham County v. Luten Bridge Co., 35 F.2d 301 (4th Cir. 1929)
Definition
The duty to mitigate damages, also known as the doctrine of avoidable consequences, requires the non-breaching party in a contract dispute to take reasonable steps to minimize or reduce the losses caused by the other party's breach. A party who fails to mitigate cannot recover damages for losses that could have been avoided through reasonable effort. The duty does not require heroic or extraordinary measures—only steps that a reasonable person in the same position would take.
The duty to mitigate operates as a limitation on damages rather than as an affirmative obligation. The breaching party bears the burden of proving that the non-breaching party failed to mitigate and that reasonable mitigation efforts would have reduced the damages. The non-breaching party is not required to mitigate if doing so would involve undue risk, burden, or humiliation. For example, in Shirley MacLaine Parker v. Twentieth Century-Fox, the court held that an actress was not required to accept a different and inferior film role to mitigate damages from the studio's breach.
Under the UCC, the duty to mitigate is reflected in the cover provisions of section 2-712, which allows a buyer to purchase substitute goods in good faith and recover the difference, and section 2-706, which allows a seller to resell goods and recover the difference. In employment contracts, a wrongfully terminated employee must seek comparable employment but is not required to accept a position of a different kind or in a different location. The costs of reasonable mitigation efforts are recoverable as incidental damages.
Key Elements
- 1A breach of contract has occurred
- 2The non-breaching party has knowledge of the breach
- 3Reasonable steps could have been taken to reduce the resulting losses
- 4The non-breaching party failed to take those reasonable steps
- 5The breaching party proves that mitigation would have reduced the damages
Landmark Cases
Rockingham County v. Luten Bridge Co.
35 F.2d 301 (4th Cir. 1929)
Held that after a county repudiated a bridge construction contract, the builder could not continue performance and recover the full contract price—it had a duty to stop work and mitigate.
Parker v. Twentieth Century-Fox Film Corp.
3 Cal. 3d 176 (1970)
Held that Shirley MacLaine was not required to accept a different and inferior film role to mitigate damages, establishing that mitigation need not involve substantially different employment.
S.J. Groves & Sons Co. v. Warner Co.
576 F.2d 524 (3d Cir. 1978)
Addressed the standard for reasonable mitigation efforts, holding that the non-breaching party need not take measures that would be unreasonable under the circumstances.
Exam Tips
- The duty to mitigate limits recovery but is not an affirmative duty—the breaching party bears the burden of proving failure to mitigate.
- Reasonable is the key standard: the non-breaching party need not take extraordinary or humiliating steps to mitigate.
- In employment cases, the employee must seek comparable employment but not substantially different or inferior positions.
- Costs of mitigation are recoverable as incidental damages—factor them into the damage calculation.
Common Mistakes to Avoid
- Treating the duty to mitigate as requiring the non-breaching party to accept any available substitute, regardless of quality or type.
- Placing the burden of proof on the non-breaching party—it is the breaching party who must prove failure to mitigate.
- Forgetting that reasonable costs incurred in mitigation efforts are themselves recoverable as incidental damages.
Memory Aid
Mitigate = Minimize. You cannot sit back and let damages pile up. Take reasonable steps to stop the bleeding, and the breacher pays what is left.