Mitigation of Loss CASES
In English law, mitigation of loss is a principle requiring a claimant to take reasonable steps to minimise the damages suffered after a breach of contract or tortious wrong. Losses that could reasonably have been avoided are generally not recoverable.
Definition and Principles
Mitigation does not impose a strict duty but sets limits on recoverable damages. The law expects claimants to act reasonably, without demanding extraordinary measures or undue sacrifice.
Requirements for Establishing
- Reasonableness: The claimant must take steps that an ordinary prudent person would consider sensible.
- Proportionality: Mitigation efforts should not involve excessive risk or cost.
- Causation: Losses directly attributable to a failure to mitigate may be irrecoverable.
- Assessment: Courts evaluate mitigation objectively, considering circumstances at the time of the breach.
Practical Applications
Examples include a seller reselling goods after a buyer’s refusal to accept them, or an employee seeking alternative work after wrongful dismissal. Reasonable action limits the damages the defendant must pay.
Importance
Mitigation of loss promotes fairness by preventing claimants from recovering avoidable damages. It ensures compensation reflects genuine loss while discouraging wasteful or unreasonable conduct.
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An impecunious claimant, Mr Lagden, hired a car on credit at a higher rate following a non-fault accident. The House of Lords held he could recover the full cost, as his lack of funds made the more expensive credit hire a reasonable step. Facts The respondent, Mr Lagden, had his car damaged due to the negligence of the appellant, Mr O’Connor. Mr Lagden required a replacement vehicle whilst his was being repaired. Due to his poor financial circumstances (being unemployed and on benefits), he was unable to afford the ‘spot rate’ for a hire car from a standard rental company.
A pulp buyer received goods late but resold them for more than their market value on the delivery date. The Privy Council held that damages for late delivery should reflect the buyer's actual, mitigated loss, not a notional one based on market price differences. Facts The appellant, Wertheim, contracted to buy 3,000 tons of wood pulp from the respondent, Chicoutimi Pulp Company, for delivery between September and November 1900. The respondent breached the contract by failing to deliver on time, with the pulp only arriving between June and November 1901. The appellant accepted the late delivery. At the time delivery
A seller wrongfully repudiated a contract but offered to continue supplying goods on a cash-only basis. The buyer rejected this and sued for damages based on the higher market price. The court held the buyer should have mitigated their loss by accepting the reasonable new offer. Facts The plaintiffs (Payzu, Ltd.) entered into a contract with the defendant (Mrs Saunders) for the purchase of a quantity of silk, to be delivered in instalments over nine months. Payment for each delivery was to be made within one month. The plaintiffs failed to make the first payment on time because their cheque
Facts The appellants, Waterlow & Sons Ltd, were a firm of printers who held a contract with the respondent, the Bank of Portugal, for the exclusive printing of 500-escudo banknotes. A criminal mastermind, Marang, pretending to be an authorised agent of the Bank, deceived Waterlow into printing 580,000 additional banknotes of the same design. These unauthorised notes were physically indistinguishable from the genuine ones. Marang and his confederates successfully introduced these notes into circulation in Portugal, causing a significant inflation of the currency and a crisis of confidence in the nation’s monetary system. Faced with this crisis, the Bank of
