8. Duty to Mitigate — Why Damages Are Capped at the Avoidable Loss
A breach doesn't give the injured party a licence to let losses pile up and then bill the wrongdoer for all of it. The last line of Section 73 quietly does a lot of work here — this post is about the limit it places on every damages claim in this unit.
The Problem This Topic Solves
Once someone breaches a contract, the injured party could, in theory, do nothing at all and let the consequences of the breach snowball — then sue for the full, inflated total. The law does not allow this. The injured party is expected to act like a reasonable person protecting their own interests, and any loss that reasonable action would have avoided is simply excluded from the damages bill, regardless of who was originally at fault for the breach.
The Statutory Basis — Explanation to Section 73
Section 73's own explanation states: "In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account." This single line is the entire statutory foundation for what is commonly called the "duty to mitigate" — though it is not really a duty in the usual legal sense at all. The breaching party cannot sue the injured party for failing to mitigate; it is purely a limitation on the amount of damages recoverable. If the injured party doesn't mitigate, they simply cannot claim the avoidable portion of the loss — nothing more happens to them beyond that reduced recovery.
Rule 1 — Take Reasonable Steps, or Lose the Avoidable Loss
The injured party must take whatever reasonable steps are available to reduce the loss flowing from the breach. If they fail to do so, the portion of loss that reasonable action would have avoided is simply struck out of the damages calculation — not as a penalty on the injured party, but because that portion of loss is treated as not having been genuinely "caused" by the breach at all, once a reasonable alternative existed.
Rule 2 — "Reasonable" Does Not Mean Extraordinary
The standard is reasonableness, not heroics. The injured party is not required to take unusual, risky, or financially dangerous steps, is not required to spend their own money they don't have or risk their credit, is not required to embark on difficult or uncertain litigation against a third party, and is not required to accept an unreasonable offer from the very party who broke the contract if doing so would create fresh complications.
Rule 3 — Gains From Mitigation Reduce the Claim
If the injured party's reasonable mitigating steps happen to produce a benefit — not just avoid further loss, but actually improve their position compared to where they would have been had the contract been performed — that benefit is set off against the damages claimed. The injured party cannot keep both the full original damages figure and any windfall gained while mitigating.
British Westinghouse Electric & Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd. [1912] AC 673 — the sellers supplied turbines that turned out to be defective and less efficient than promised. The buyers, instead of rejecting them, kept using the defective turbines while sourcing far more efficient replacement turbines from a different manufacturer. The replacements turned out to be so efficient that the buyers actually saved more money in the long run than they would have if the original turbines had performed exactly as promised. The House of Lords held that these savings, gained through the buyers' own reasonable mitigating action, had to be taken into account and set off against their damages claim — a claimant cannot recover for a loss that their own reasonable steps have already more than made good.
| Basis | Counts as Reasonable Mitigation | Not Required as Mitigation |
|---|---|---|
| Effort expected | Ordinary, sensible steps a prudent person would take to protect their own position | Extraordinary, risky, or financially dangerous steps |
| Cost/resources | Reasonable expenses incurred while mitigating are themselves recoverable | Spending money the claimant doesn't have, or risking their credit |
| Third parties | Accepting a genuinely fair alternative arrangement | Difficult litigation against a third party, or an unreasonable offer from the wrongdoer |
- The Explanation to Section 73 requires that means of remedying the inconvenience be taken into account when estimating loss
- Avoidable loss — loss reasonable steps would have prevented — is not recoverable as damages
- British Westinghouse Electric & Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd. (1912) — gains made through reasonable mitigation are set off against the damages claim
- "Reasonable" mitigation does not require extraordinary, risky, or financially dangerous action
- Failing to mitigate is not independently actionable — it simply caps what can be recovered
- This principle ties directly back to Post 7's Section 73/74 framework — mitigation is the final variable in the damages calculation, not a separate remedy
A Practical Example
A wholesaler breaches a contract to supply 500 units of a raw material to a manufacturer. The market price for that material has not changed, and an equivalent supplier is readily available at the same price. If the manufacturer simply stops production instead of buying from the alternative supplier, and later sues for the full value of the lost production, the wholesaler can argue successfully that most of that loss was avoidable — the manufacturer could and should have sourced the material elsewhere at the going rate, and is entitled only to the (likely minor) extra cost or delay actually caused by having to switch suppliers, not the entire lost production value.
Quick Revision Points
- The Explanation to Section 73 is the statutory basis for the duty to mitigate
- Avoidable loss — loss that reasonable steps would have prevented — cannot be recovered
- The standard is reasonableness, not extraordinary or risky action
- British Westinghouse (1912): gains from reasonable mitigation are set off against the damages claimed
- Failing to mitigate is not a separate wrong — it only limits the damages recoverable
- This closes the unit's damages framework: Sections 73–74 fix what is recoverable in principle; mitigation fixes how much of it actually is
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