Mitigation in contractual breach claims
Produced in partnership with Zainab Hodgson and Kavidha Clare of CMS
Mitigation in contractual breach claims

The following Dispute Resolution practice note produced in partnership with Zainab Hodgson and Kavidha Clare of CMS provides comprehensive and up to date legal information covering:

  • Mitigation in contractual breach claims
  • When is mitigation in contract claims relevant to consider?
  • What is the rule on mitigation?
  • The 'duty' to take all reasonable steps to mitigate
  • What is reasonable mitigation?
  • Recovery for loss incurred in attempts to mitigate the damage
  • Avoided loss (collateral benefit)—no recovery for loss that the innocent party has recovered
  • Gaining a benefit when mitigating—when will benefits derived from mitigating action be taken into account and set against the claimant's loss?
  • Benefit must be caused by the breach—Fulton Shipping (The New Flamenco)
  • Correct party needs to mitigate to recover
  • More...

Mitigation in contractual breach claims

When is mitigation in contract claims relevant to consider?

Even where causation and remoteness have been established (see Practice Note: Causation and remoteness in contractual breach claims) in relation to loss, any recoverable damages can be affected if the claimant has failed to mitigate their loss. That is, the innocent party cannot recover damages for any loss which they could have avoided but failed to avoid through unreasonable action or inaction. Central to the issue of mitigation is the question of what steps were reasonable or unreasonable for the claimant to take?

What is the rule on mitigation?

The rule on mitigation comprises three distinct components:

  1. the innocent party must take all reasonable steps to mitigate their loss. The innocent party cannot recover damages for any loss, which they could have avoided but failed to avoid through unreasonable action or inaction

  2. where the innocent party takes reasonable steps to mitigate their loss, they can recover any losses incurred in taking such steps

  3. where the innocent party takes steps to mitigate their loss and these steps are successful, the defaulting party is entitled to the benefit, which arises as a result of the innocent party's action

Note: Leggatt J in Thai Airlines v KI Holdings stated that while distinguishing the three components may sometimes be useful, it is important not to lose sight of

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