Mitigation of Damages Clause

Mitigation of Damages Clause

A Mitigation of Damages Clause is a provision typically found in contracts that requires a party suffering a loss or damage to take reasonable steps to reduce or minimize that loss. This legal principle is grounded in the idea that a party should not be able to recover for losses that could have been avoided through reasonable efforts.

The Mitigation of Damages Clause serves to protect the interests of the party that may be liable for damages by ensuring that the injured party does not sit idly while the losses accumulate. For instance, if an individual contracts for the sale of goods and the seller breaches the contract, the buyer is expected to seek alternative sources for the goods at a reasonable price instead of simply claiming the entire amount of the original contract as damages.

In practical terms, if a business experiences a breach of contract, it must demonstrate that it took appropriate actions to mitigate its losses, such as finding substitute suppliers or reducing costs. Failure to do so may result in a court reducing the amount of damages awarded, as the injured party may not be fully compensated for losses that could have been avoided. Therefore, a Mitigation of Damages Clause emphasizes the obligation to act prudently in response to a breach, promoting fairness in contractual relationships.