PastPaperHero | Remedies - Avoidable consequences and mitigation of damages

Learning Outcomes

This article explains avoidable consequences and mitigation of damages in contract and tort law, including:

How to identify when the duty to mitigate arises after breach of contract or tortious injury and which parties it binds.
How courts distinguish reasonable from unreasonable mitigation efforts on typical MBE fact patterns, considering risk, expense, humiliation, and similarity of substitute performance.
How to compute contract and tort damages as if the claimant had taken reasonable steps to reduce loss, and how that calculation interacts with expectation, consequential, and incidental damages.
Application of mitigation principles in classic contract scenarios, such as wrongful discharge employment cases, construction and service contracts, and UCC cover and resale problems.
Application of mitigation principles in tort cases, especially personal injury and property damage questions involving medical treatment, return to work, and protection of damaged property.
The allocation of the burden of proof on mitigation to the defendant, including what must be shown to establish avoidable loss on the MBE.
Common exam traps, such as confusing mitigation with contributory or comparative negligence, or incorrectly treating mitigation failure as a complete bar to recovery instead of a reduction in damages.
Strategic steps for approaching MBE questions that raise mitigation issues, including spotting trigger facts and organizing a damages analysis under time pressure.

MBE Syllabus

For the MBE, you are required to understand how mitigation limits money damages in contract and tort, with a focus on the following syllabus points:

The duty of a claimant to mitigate damages after breach or injury.
How avoidable consequences limit expectation and consequential damages.
The consequences of failing to take reasonable, comparable steps to reduce loss.
The application of mitigation in contract (including UCC sales) and tort problems.
The burden of proof on the defendant and the effect of mitigation on the calculation of damages.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

If a claimant fails to take reasonable steps to reduce their loss after a breach of contract, what is the likely effect on their damages award?
1. They recover all losses, including avoidable ones.
2. They are barred from any recovery.
3. Their damages are reduced by the amount they could have avoided.
4. They must pay damages to the breaching party.
Which of the following best describes the "duty to mitigate" in contract law?
1. The claimant must accept any substitute performance.
2. The claimant must take reasonable steps to minimize loss.
3. The claimant must forgive the breach.
4. The claimant must renegotiate the contract.
In a personal injury claim, if the injured party unreasonably refuses recommended medical treatment that would have reduced their harm, what is the likely result?
1. Full damages are awarded.
2. Damages are reduced to reflect avoidable harm.
3. No damages are awarded.
4. The defendant is excused from liability.

Introduction

The law does not allow a claimant to recover damages for losses that could have been reasonably avoided after a breach or injury. This is known as the rule of avoidable consequences or the duty to mitigate damages. The principle applies in both contract and tort, requiring claimants to act reasonably to limit their losses. If a claimant fails to do so, their damages may be reduced accordingly.

This limitation is exam‑relevant because it interacts with the three main limits on expectation damages:

Certainty – losses must be provable with reasonable certainty.
Foreseeability – especially for consequential damages.
Mitigation (avoidable consequences) – losses the claimant could reasonably have avoided are not recoverable.

Mitigation does not erase the breach or tort; it only reduces the money award. Nor does it create a separate cause of action against the claimant. It simply means damages are calculated as if the claimant had behaved reasonably after the wrong.

Key Term: Avoidable Consequences
The rule that a claimant cannot recover damages for loss that could have been reasonably avoided after breach or injury. Damages are confined to the portion of loss that was unavoidable even with reasonable post‑breach efforts.

Key Term: Duty to Mitigate
The obligation on a claimant to take reasonable steps to reduce or prevent further loss following a breach of contract or tort. Failure to do so limits recovery but does not bar the claim.

On the MBE, mitigation often appears in:

Wrongful discharge or other employment contracts.
Construction and service contracts.
UCC sales problems involving cover or resale.
Personal injury questions involving medical treatment or return to work.
Property damage questions (e.g., failing to protect damaged property from further loss).

The Duty to Mitigate

Once a breach of contract or a tortious injury occurs, the claimant must take reasonable steps to minimize their loss. This does not mean the claimant must take every possible action—only those that a reasonable person would take in the circumstances, considering cost, risk, and practicality.

Key Term: Reasonable Efforts to Mitigate
Steps that a reasonable person in the claimant’s position would take after breach or injury to reduce continuing or additional loss, without undue risk, expense, or humiliation.

Key points:

The duty arises after the breach or injury, not before.
The claimant is judged by an objective standard of reasonableness.
The claimant need not incur great risk, major hardship, or sacrifice substantial rights.
Mitigation efforts must be reasonably similar to the performance or situation lost; radical changes are not required.

If the claimant unreasonably fails to mitigate, damages will be reduced by the amount that could have been avoided. The breach or tort still exists; the only consequence is a lower damages figure.

Burden of proof: The defendant bears the burden of proving:

That reasonable mitigation measures were available,

That the claimant failed to take them, and

The amount of loss that would have been avoided.

Courts calculate damages as if the claimant had mitigated, regardless of what they actually did.

Reasonableness and Foreseeability

The claimant is not required to take extraordinary or risky measures. Only reasonable actions are expected. The cost and practicality of mitigation are considered. If mitigation would involve undue risk, expense, or hardship, the claimant is not penalized for not taking those steps.

Key Term: Consequential Damages
Losses that result from the claimant’s particular circumstances (e.g., lost profits on a resale contract) rather than the standard loss anyone would suffer from this type of breach. They are recoverable only if foreseeable at the time of contracting.

Reasonableness has several dimensions:

Risk: No duty to undergo dangerous medical treatment or to enter hazardous situations.
Expense: No duty to incur very large costs to save the defendant money, especially if reimbursement is uncertain.
Humiliation / dignity: No duty to accept degrading or humiliating alternatives (especially in employment cases).
Similarity: In contracts, no duty to take substitute performance that is substantially different in kind or in location.

Foreseeability is primarily about which types of losses are compensable (e.g., lost profits), but it also plays a role in mitigation:

The claimant must take mitigation steps that are reasonably foreseeable in the situation.
The defendant must show that the asserted mitigation measures (e.g., a comparable job, available substitute goods) were realistically available.

Mitigation ties into the Hadley v. Baxendale foreseeability rule: the law does not shift avoidable, unusual losses to the breaching party when the non‑breaching party could reasonably prevent them.

Application in Contract Law

In contract cases, the duty to mitigate means the non‑breaching party must seek alternative performance or substitute goods or services if available on reasonable terms, and must avoid letting losses snowball unnecessarily.

Common contract settings:

1. Employment Contracts

A wrongfully discharged employee has a duty to seek comparable employment.

Key Term: Comparable Employment
Substitute employment that is similar in kind, status, compensation, and location to the original job. The claimant need not accept a job that is inferior, more dangerous, or significantly different in character.

Rules:

The employee must use reasonable efforts to find comparable work in the same locality.
The employee need not accept:
- A different line of work (e.g., from lead actor in a musical to small role in a very different film).
- A job in a distant location if relocation would be a major hardship.
- Work that is humiliating or clearly inferior in status.

Damages for wrongful discharge are typically:

Contract salary for the period of employment
minus:
- Earnings actually obtained in substitute employment, and
- Earnings that could have been obtained in comparable work with reasonable effort.

If the employer proves that comparable jobs were available and the employee unreasonably failed to seek or accept them, lost wage damages will be reduced accordingly.

2. Construction and Service Contracts

In construction, mitigation works in both directions:

If the owner breaches mid‑project, the contractor must stop work and avoid running up additional costs, unless completion would reduce overall loss.
If the contractor breaches, the owner must take reasonable steps to prevent further damage (e.g., hiring a new roofer before the house is ruined by rain).

Example (based on a classic bar pattern): a roofer breaches a contract to fix a leaky roof. The owner cannot simply do nothing while rain ruins valuable carpets and then claim all of the resulting damage. The owner must hire another reasonably‑priced roofer within a reasonable time.

3. UCC Sales: Cover and Resale

In sales of goods, the UCC frames mitigation through cover (for buyers) and resale (for sellers).

Key Term: Cover (UCC)
A buyer’s purchase of substitute goods in good faith and without unreasonable delay after a seller’s breach. Damages are measured using the cover price if cover is properly obtained.

For the buyer:

If the seller fails to deliver, the buyer should purchase reasonable substitute goods (cover).
Damages are typically:
- Cover price − contract price + incidental and consequential damages.
If the buyer does not cover, damages are measured using the market price at the time of breach. The buyer cannot sit idle and claim the entire contract price.

For the seller:

If the buyer repudiates or wrongfully rejects, the seller should resell the goods in a commercially reasonable manner.
Damages are typically:
- Contract price − resale price + incidental damages.
If the seller fails to resell where reasonable, damages are usually based on the market price, not on a worst‑case resale.

The UCC does not speak in terms of “duty,” but in practice the formulas assume the non‑breaching party acts reasonably to limit loss.

Worked Example 1.1

A landlord breaches a lease by evicting a tenant before the end of the term. The tenant could have rented a similar apartment nearby for the same rent but chooses not to do so and remains unemployed for several months.

Question: How will the tenant's damages be calculated?

Answer:
The tenant's damages will be reduced by the amount of rent they could have avoided losing by renting the similar apartment. The duty to mitigate requires the tenant to take reasonable steps to find substitute accommodation. The landlord must prove that comparable units were available and that the tenant unreasonably refused them.

Worked Example 1.2

A buyer contracts to purchase widgets from a seller. The seller breaches by failing to deliver. The buyer could have bought substitute widgets from another supplier at a slightly higher price but chooses not to do so and claims the full contract price as damages.

Question: What damages can the buyer recover?

Answer:
The buyer can recover the difference between the contract price and the reasonable cost of substitute widgets (cover or market price at the time of breach), plus any reasonable incidental and foreseeable consequential damages. The buyer cannot recover the full contract price because that would include loss that could have been avoided by purchasing substitutes.

Worked Example 1.3

A plaintiff suffers a broken arm in a car accident caused by the defendant. The plaintiff refuses a simple, low‑risk surgery recommended by doctors, which would have restored full function, and instead does nothing, resulting in permanent disability.

Question: What damages will the plaintiff receive?

Answer:
Damages will be reduced to reflect only the harm that could not have been avoided by reasonable medical treatment. The plaintiff cannot recover for the portion of permanent disability that would have been avoided by accepting reasonable care. The defendant must show that the surgery was low‑risk and likely to succeed.

Worked Example 1.4

An employee has a one‑year employment contract at $80,000. After three months, the employer wrongfully fires her. Comparable jobs at$ 78,000 are available in the same city, but she makes no effort to apply and remains unemployed.

Question: How are her lost wage damages measured?

Answer:
Without mitigation, she would claim $80,000 −$ 20,000 (already earned) = $60,000. But if the employer proves that comparable jobs at$ 78,000 were reasonably available and that she unreasonably failed to pursue them, damages are reduced as if she had earned $78,000 for the year. Her recovery becomes$ 2,000 (the $2,000 difference between her contract salary and the comparable salary) rather than the full$ 60,000.

Worked Example 1.5

A homeowner hires a builder to complete a deck for $20,000. After the builder partially completes the work and then breaches, another qualified builder is willing to finish the job for$ 11,000. The homeowner refuses and instead hires a luxury firm for $25,000 and sues the original builder for$ 25,000.

Question: How much can the homeowner recover?

Answer:
The homeowner can recover what it would have reasonably cost to complete the deck, not what they chose to spend. If the original builder proves that a competent contractor would have completed for $11,000, the homeowner’s completion cost is treated as$ 11,000. The homeowner’s expectation damages are measured using that reasonable figure, not the extravagant $25,000 actually paid.

Application in Tort Law

In tort, especially personal injury, the claimant must seek appropriate medical treatment and avoid actions that would worsen their condition. The avoidable consequences rule here is sometimes called the duty to minimize damages, but again it is not a separate tort; it limits the damages award.

Typical expectations:

Accept reasonable, standard medical treatment unless it involves serious risk.
Follow basic medical advice (e.g., attend physical therapy, wear prescribed brace).
Take reasonable steps to return to work when medically able.
Take reasonable steps to protect damaged property from further harm (e.g., tarping a damaged roof).

Mitigation in tort is distinct from contributory or comparative negligence:

Contributory/comparative negligence looks at the plaintiff’s conduct before the injury.
Mitigation/avoidable consequences looks at conduct after the injury.

Failure to mitigate does not eliminate liability but reduces damages to the level that would have existed had the plaintiff behaved reasonably.

Worked Example 1.6

A driver negligently dents the plaintiff’s car door. The plaintiff parks the car on the street with the window stuck open, even though he could cheaply cover it. Rain later destroys the interior.

Question: What damages are recoverable?

Answer:
The defendant is liable for the initial dent and for damage that would have occurred even with reasonable steps, but not for additional interior damage that could easily have been avoided (e.g., by covering the window). The plaintiff’s unreasonable failure to protect the car reduces his recovery by the avoidable portion of the loss.

Mitigation interacts with other tort doctrines:

The eggshell plaintiff rule still applies: a defendant must take the plaintiff as found. Pre‑existing vulnerability is not “mitigation failure.” But if the plaintiff’s post‑injury choices unreasonably worsen that vulnerability, that additional harm may be excluded.
The collateral source rule (payments by insurance or others) does not count as mitigation by the plaintiff and generally does not reduce the defendant’s liability on the MBE.

Limits on Recovery

A claimant cannot recover for losses that could have been avoided by reasonable mitigation. However:

They are not required to accept humiliating, dangerous, or unreasonable alternatives.
They need not sacrifice substantial legal rights or radically change their lifestyle or career.
Courts do not demand perfection; they demand reasonableness.

If the claimant incurs additional reasonable expenses in mitigation (e.g., costs of cover, fees paid to a substitute contractor, additional rent in temporary accommodation), these are recoverable as part of damages. The law encourages mitigation by reimbursing reasonable mitigation costs even if the mitigation does not fully succeed.

Mitigation also interacts with other limits:

Losses that the claimant cannot prove with reasonable certainty are unrecoverable, whether or not they were mitigated.
Unforeseeable consequential damages are unrecoverable even if the claimant could not mitigate them.
Where mitigation would have eliminated foreseeable losses, failing to mitigate cuts off that portion of recovery.

Exam Warning

The duty to mitigate does not require the claimant to accept humiliating, dangerous, or unreasonable alternatives. Only reasonable steps are expected. For employment contracts, this means no duty to accept inferior or fundamentally different jobs. For personal injury, there is no duty to undergo risky surgery or experimental treatment. If mitigation would involve significant risk or hardship, the claimant is not penalized for refusing.

Revision Tip

Always ask, after establishing liability and the basic measure of expectation or compensatory damages: Could the claimant reasonably have reduced this loss after breach or injury? If so, identify what steps were available, whether they were comparable and reasonable, and calculate damages as if those steps had been taken. Remember that the defendant bears the burden of proving failure to mitigate.

Key Point Checklist

This article has covered the following key knowledge points:

The avoidable consequences rule limits recovery to losses that could not have been reasonably avoided.
The duty to mitigate applies in both contract and tort law and focuses on post‑breach or post‑injury conduct.
Claimants must take reasonable steps to reduce loss after breach or injury; extraordinary, dangerous, or humiliating steps are not required.
In contract, mitigation commonly involves cover, resale, or seeking comparable employment; mitigation efforts must be reasonably similar to the original deal.
In tort, claimants must accept reasonable medical care and avoid aggravating their injuries or property damage.
Damages are reduced by the amount of loss that could have been avoided; courts calculate damages as if the claimant had mitigated.
Reasonable mitigation expenses are recoverable as part of damages.
The defendant bears the burden of proving both the availability of reasonable mitigation and the amount of avoidable loss.
Mitigation is distinct from contributory/comparative negligence; it concerns post‑wrong conduct and never bars the cause of action outright.

Key Terms and Concepts

Avoidable Consequences
Duty to Mitigate
Reasonable Efforts to Mitigate
Comparable Employment
Cover (UCC)
Consequential Damages

Remedies - Avoidable consequences and mitigation of damages