Question

Why does the law require a nonbreaching party to mitigate damages?

Draft a 250 - 300 word discussion explaining the your answer in detail.

Answer 1

If in a contract there are two parties involved and one of the party breaches the contract, then it is the responsibility of the wronged party or the nonbreaching party to mitigate the damages. This concept is in place because there is a bigger construct at work or play. This concept is known as avoidance of economic waste. In general if economic waste is avoided, the society benefits. Let us take an example:

Say there is farmer who grows onions. This farmer entered into a contract with a vegetable vendor that the vendor will buy his produce at the cost of Rupees 50 per KG. However, when the harvesting season arrives, the vendor refuses to buy from the farmer and instead buys from another producer who is selling at 45 Rupees per KG. In this case the vendor has breached the contract, however, as per law it is the duty of the farmer to avoid economic loss, ie. Instead of throwing away his onions to rot, he needs to find another vendor and sell the same to him. By doing so he would be avoiding economic loss to the society. The society’s general interest to avoid economic loss stems from the fact that in order to produce any product or service, there are resources of the society that are at play. Eg. In our case, the farmer would have used water for irrigation ( a common asset for entire society), fertilizers which would have been manufactured using investor’s money etc.

Therefore, the law tries to discourage economic waste, and by imposing the duty on every party to contract to make efforts to minimize their damages, tries to avoid economic waste.