Center for Contract and Economic Organization
Program in the Law and Economics of Capital Markets
The duty to mitigate is a universally accepted principle of contract law requiring that each party exert reasonable efforts to minimize losses whenever intervening events impede contractual objectives. Although applications of the mitigation principle pervade the specific rules of contract, it is startling how many questions remain unanswered as to precisely what efforts the mitigation duty requires and what point in time the obligation arises. For example, under what circumstances does mitigation require an injured party to deal with the contract breacher? Why does the duty to minimize losses mature only after the breach, even if the injured party became aware much earlier of a significant danger of breach and had a cost-effective opportunity to mitigate the prospective loss? Is the duty to communicate special or unforeseeable circumstances confined to the time of contracting, even where the communication of post-contract but pre-performance information might reduce costs? These and many similar questions remain unresolved because the relationship among the diverse rules of mitigation has not been systematically articulated.
Recognizing that each party's mitigation responsibility is inextricably linked to the performance obligation of his contracting partner is the key step in fitting the mitigation principle into a general theory of contractual obligation. In recent years, a maturing theoretical scholarship has furthered understanding of the performance and remedial obligations of contracting parties. By focusing on particular performance problems, this scholarship has not only uncovered further questions but also heightened interest in a theoretical formulation that weaves the performance and remedial rules of contract into a single fabric.
Charles J. Goetz & Robert E. Scott,
The Mitigation Principle: Toward a General Theory of Contractual Obligation,
Va. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/399