The duty to mitigate damages is a basic tenet of both contract law and torts. The duty to mitigate damages states that, where someone was harmed as a result of a breach of contract or some other wrongdoing, the wrongdoer must make reasonable efforts to limit that harm. This notion may sound counterintuitive– why put the burden on the victim? It may be helpful to think of it as a matter of reasonableness. If the aggrieved individual may avoid or mitigate the harm through any reasonable measures, then they have a duty to do so.
Who Has the Duty to Mitigate Damages?
The law of both contracts and torts levies the responsibility to mitigate damages on anyone who suffers harm. Therefore, this is an expansive duty; remember that contracts are in every corner of society. Leasing an apartment, hiring an employee, purchasing a car, or even buying a slice of pizza– all of these activities are rooted in contracts, whether they be express or implied. Likewise, anyone who suffers a physical, mental, or emotional injury as a result of a car accident, a fight, or some other event or dispute has the same responsibility to mitigate damages. The duty is broad– if you have been wronged, then you must take reasonable measures to mitigate the loss suffered.
Why Try to Mitigate Damages?
If a person has been wronged during a contract or tort, the wrongdoer must take reasonable steps to mitigate the damages. Although failure to take such reasonable measures is not illegal per se, it can be costly.
When a court awards damages, it will consider the totality of the circumstances, including whether the plaintiff took reasonable efforts to mitigate its damages. Although recovery is not conditioned on whether the plaintiff met its duty to mitigate, the extent of that recovery is. The proper measure of damages is the difference between (1) the harm suffered and (2) the extent to which it could have been reduced by reasonable efforts.
Consider a matter of employment discrimination. Where an employee believes they were terminated wrongfully as a result of workplace discrimination, they may have a strong case that could lead them to recover an array of damages, such as lost wages. However, such damages are designed to account for the harm inflicted upon the individual, and there are reasonable measures the employee can take to minimize this harm, such as seeking alternative employment. The terminated employee may then find it difficult to recover lost wages since they had a duty to mitigate these damages. As a result, they might only recover a reduced amount of damages, accounting for the wages they could have earned or for the reasonable efforts they failed to take.
Say the employee had an annual salary of $100k, and it took them six months to secure alternative employment, which happened to provide the same annual salary. The employee could therefore recover six months of salary, or $50k, in lost wages. If the alternative employment is more or less lucrative, that change may be taken into account. However, if the employer can prove that the employee failed to make reasonable efforts to obtain alternative employment earlier, the employee may not be able to win damages for lost wages, or the damages they win may be reduced to that period in which they exercised reasonable efforts.
How to Mitigate Damages
Because the duty to mitigate damages can have such a substantial impact on any recovery, it is critical to know what steps to take to comply with the duty. What constitutes “reasonable efforts”? Obviously, the answer is heavily rooted in the particular context, but the remainder of this article will explain how one might meet their duty to mitigate their losses in a few different contexts.
Landlord-Tenant Disputes
Landlord-tenant disputes are extraordinarily common for a number of reasons. Where the tenant is in breach, the lease often imposes substantial liabilities. For example, the lease (or a court) will often hold the tenant responsible for the loss of rental income to the landlord. However, the landlord has a duty to mitigate their damages. This duty requires the landlord to seek a new tenant, rather than let the property sit empty while they collect from the ex-tenant. Failure to expend reasonable efforts to mitigate their losses in this way could result in a smaller recovery.
Notably, a landlord’s duty to mitigate damages does not require the landlord to give the instant property any special treatment. The landlord must market the available space on equal grounds with their other vacancies, but they do not need to prioritize it.
Employment Discrimination
As discussed previously, employees who have been terminated as a result of workplace discrimination have a duty to mitigate their damages. Because much of these damages stem from lost wages, terminated employees should seek alternative employment immediately– for their own sake, but also to meet the duty to mitigate losses. However, this does not mean the employee must change jobs or accept a demotion. Rather, a terminated employee merely needs to make reasonable efforts to seek a substantially equivalent position in order to satisfy their duty to mitigate damages. Failure to apply, take the job hunt seriously, or accept an offer could result in a smaller recovery.
Default
A creditor is responsible for mitigating damages when a debtor defaults. For example, a debtor may take out a large loan to pay for a new house. If they fail to meet their minimum payments, they will be in default. The creditor must then take reasonable steps to mitigate their overall losses. Therefore, the creditor will likely sell the house and use the proceeds to pay off the debt. If the sale price exceeds the remaining debt, then the remaining funds go to the debtor. If the sale price is insufficient, then the debtor remains liable for the balance.
Contact Pride Legal
If you or a loved one have been wronged or have wronged someone, you may need to think about the duty to mitigate damages. We invite you to contact us at Pride Legal for legal counseling or any further questions. To protect your rights, hire someone who understands them.