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.

Beoco Ltd v Alfa Laval Co Ltd [1993] EWCA Civ 22 (21 December 1993)

A heat exchanger exploded at Beoco's factory due to the plaintiff's own negligence in failing to properly test repairs before resuming operations. Though the first defendant breached warranty in supplying defective equipment, the plaintiff could not recover hypothetical lost profits for repairs never carried out due to the supervening explosion caused by their own recklessness.

Hayes v Dodd [1988] EWCA Civ 8 (07 July 1988)

A couple purchased a motor repair business relying on their solicitors' negligent advice that a right of way existed. When the access was blocked, their business failed. The court assessed damages on a 'no-transaction' basis, awarding expenditure less recoveries, but disallowed damages for mental distress in commercial contracts.

Hochster v De La Tour [1853] EWHC QB J72 (25 June 1853)

A courier was hired in April 1852 to commence employment on 1st June 1852. In May, the employer repudiated the contract. The court held the courier could sue immediately for breach without waiting until the performance date. This landmark case established the doctrine of anticipatory breach of contract.

Lagden v O’Connor [2003] UKHL 64

Mr Lagden's parked car was damaged by Mrs O'Connor's negligent driving. Being impecunious, he could not afford spot rate car hire and used a credit hire company instead. The House of Lords held that impecunious claimants can recover the full cost of credit hire services, departing from The Liesbosch principle that impecuniosity cannot increase recoverable damages.

Waterlow & Sons Ltd v Banco de Portugal [1932] UKHL 1, [1932] AC 452

Waterlow negligently printed unauthorised Portuguese banknotes after being deceived by a fraudster. The House of Lords held that the Bank of Portugal reasonably withdrew the entire issue and could recover the face-value loss caused by the breach, applying a pragmatic approach to mitigation.

Wertheim v The Chicoutimi Pulp Company [1910] UKPC 1 (18 March 1910)

Wertheim contracted to purchase 3,000 tons of wood pulp from Chicoutimi Pulp Company for delivery between September and November 1900. Delivery was delayed until June 1901. The Privy Council held that damages for late delivery should reflect actual loss sustained, not the theoretical market price difference, as Wertheim had resold the goods at prices limiting his actual loss.

White & Carter (Councils) Ltd v McGregor [1961] UKHL 5 (06 December 1961)

An advertising company continued to display unwanted advertisements after the customer repudiated the contract on the same day it was signed. The House of Lords held (3-2) that the innocent party could elect to perform the contract and claim the contract price rather than accept repudiation and sue for damages.