Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

What is Mitigation?

September 27, 2015 | Silver Shemmings

When a breach of contract occurs, the claimant has the opportunity to claim damages, in order to put itself back into its pre-contractual position as if no breach occurred.

Mitigation is the process whereby a claimant must take reasonable steps to minimise its loss in a dispute. This is known as the ‘duty to mitigate’, and it recognises that if the claimant fails to mitigate then any damage recovery will consequently be affected. This principle is applied both in contract and tort cases.

It is important to ascertain how far the duty to mitigate stretches. First, the claimant will be unable to recover its losses that were avoidable, or, has failed to take adequate action to deal with a breach when it occurs. However, the defendant has the burden of proving that the claimant failed to mitigate. Second, it must be ascertained how reasonable any award in damages would be. The leading case on mitigation is Ruxley Electronics v Forsyth, [1996] AC 344, HL which concerned remedial works to a swimming pool. The construction of the pool was supposed to be 7 foot 6 inches at its deepest point, but on completion, it was discovered that the pool had the depth of 6 foot 9 inches. A breach of contract had occurred. The only way of rectification was to rebuild the pool, which the contractors did not wish to do. In its judgment, the focus of the court was on reasonableness. It was held that the cost of rebuilding the pool was out of proportion with the benefit that it would bring, and could not be recovered as damages. Instead, a nominal amount was awarded for the inconvenience caused.

Has mitigation occurred?

Whether the claimant has successfully mitigated its loss is a question of fact. For example, if reasonable steps could have been taken to avoid the loss, and consequently these did not take place, damages are not recoverable. However, if reasonable steps were taken, but this exacerbated the damage, the recovery may be awarded in the circumstances. Any expenditure in taking reasonable steps can also be claimed.

Appropriate time to mitigate

The best time to mitigate is when the claimant becomes aware of the breach, or ought to have known a breach has taken place. If there is an anticipated breach of contract, then the duty to mitigate will arise when the breach is communicated to the defendant.

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