Mitigation of Damages: Your Duty to Minimize Losses
What Is Mitigation of Damages?
Mitigation of damages is the legal principle requiring the injured party in a breach of contract to take reasonable steps to minimize their losses. Even when someone else breaks a contract, you cannot simply sit back and let the damages pile up — the law expects you to act reasonably to reduce the harm.
Why Mitigation Matters
Courts will reduce your damages award by any amount you could have avoided through reasonable effort. This does not mean you must go to extraordinary lengths, but you must act as a reasonable person would under the circumstances.
Example: If your tenant breaks a lease and moves out early, you have a duty to make reasonable efforts to find a new tenant. You cannot leave the property empty for the remaining lease term and sue for the full rent.
What Counts as Reasonable Mitigation
- Seeking replacement goods or services from another supplier
- Advertising a vacated property for new tenants
- Accepting a comparable job offer after wrongful termination
- Taking steps to limit ongoing financial exposure
What Does Not Count
- You are not required to accept an inferior substitute
- You do not have to spend more money than the likely recovery
- You do not need to compromise your rights under other agreements
- Mitigation costs you incur are typically recoverable as damages
Mitigation Clauses in Contracts
Some contracts explicitly address mitigation obligations. These clauses may define what steps the injured party must take and set timelines for action. Pay attention to these provisions because they may impose stricter duties than what the law otherwise requires.
When to Consult a Lawyer
If someone has breached a contract with you, consider consulting an attorney early to understand your mitigation obligations. Failing to mitigate can significantly reduce the compensation you are entitled to recover.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.