Document-Id: 949000, Please cite as: "https://www.trans-lex.org/949000"
Title
VII.4 - Duty to mitigate
Content
No. VII.4 - Duty to mitigate
A party who relies on a breach of contract by the other party must take such measures as are reasonable in the circumstances to mitigate its loss, including loss of profit, resulting from the breach. If it fails to take such measures, the party in breach may claim a reduction in the damages in the amount at which the loss should have been mitigated.
Commentary
1 This Principle is one of the most firmly established rules of transnational commercial law. A party suffering damages from a breach of contract by the other party cannot simply lean back and let the damages mount up. In fact, it often happens that a party wants to shift all the responsibility for certain damages on its counterpart while the evidence reveals that it would have been possible for that party to minimize that damage had it acted without delay at the moment it received knowledge of the damage.
2 Which measures a party relying on a breach by the other party is required to take in order to mitigate its damages, e.g. with respect to the amount of time and financial resources to be invested in or the nature of such measures, must be determined by application of the standard of reasonableness.
3 Depending on the circumstances and on what is to be considered reasonable in a given case, the party relying on a breach of contract by the other side may be under an obligation to accept alternative performance or to agree to a renegotiation of the contract in order to mitigate its damages. However, the duty to mitigate its damages does not require that party to accept unreasonable risks or burdens.
2 Which measures a party relying on a breach by the other party is required to take in order to mitigate its damages, e.g. with respect to the amount of time and financial resources to be invested in or the nature of such measures, must be determined by application of the standard of reasonableness.
3 Depending on the circumstances and on what is to be considered reasonable in a given case, the party relying on a breach of contract by the other side may be under an obligation to accept alternative performance or to agree to a renegotiation of the contract in order to mitigate its damages. However, the duty to mitigate its damages does not require that party to accept unreasonable risks or burdens.
References
Model Laws
A Contract Code: Drawn up on Behalf of the English Law CommissionPrinciples of Latin American Contract Law (PLACL)The Draft Civil Code for Israel in: Siehr, Kurt/Zimmermann, Reinhard (ed.) The Draft Civil Code for Israel in comparative perspective, 2008Doctrine
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Civil Code of the People's Republic of China (2020)Civil Code Québec 1991Contract Law of the People's Republic of ChinaContract Law of the People's Republic of ChinaEgyptian Civil CodeEthiopian Civil CodeGIW DDRGIW GDRLouisiana Civil Code 2015Nieuw Burgerlijk Wetboek - New Netherlands Civil Code ( Dutch Civil Code )Philippines Republic Act 386 (Civil Code)Russian Civil CodeInternational Legislation
Fontaine, Marcel, OHADA Uniform Act On Contract Law Preliminary DraftOrganization for the Harmonization of Business Law in Africa (OHADA), Uniform act relating to general commercial lawUNIDROIT Convention on International Financial Leasing (Ottawa, 20 May 1988).United Nations Convention on Contracts for the International Sale of Goods (CISG)Arbitral Awards
ICC Award No. 16369, YCA 2014, at page 169 et seq.ICC Award No. 2142, YCA 1976, at 132 et seq. (also published in: Clunet 1974, at 892 et seq.)ICC Award No. 2404, Clunet 1976, at 995 etICC Award No. 2478 IN 1974, YCA 1978, at 222 et seq. (also published in: Clunet 1975, at 925 et seq.).ICC Award No. 3344, Clunet 1982, at 978 et seq.ICC Award No. 4761, Clunet 1987, at 1012 et seq.ICC Award No. 5418 of 1987, YCA 1988, at 91 et seq.ICC Award No. 5514, Clunet 1992, at 1022 et seq.ICC Award No. 5721, Clunet 1990, at 1019 et seq.ICC Award No. 5865, Clunet 1998, at 1008 et seq.ICC Award No. 5885, YCA 1991, at 91 et seq.ICC Award No. 5910, Clunet 1988, at 1216 et seq.ICC Award No. 6840, Clunet 1992, at 1030 et seq.ICC Award No. 7110, 10 ICC Bull. No. 2, 1999, at 1029 et seq.ICC Award No. 8817, 10 ICC Bull. No. 2, 1999, at 75 et seq. (also published in: YCA 2000, at 355 et seq.)ICSID Award of October 7, 2003, AIG Capital Partners, Inc. and CJSC Tema Real Estate Company v. Republic of Kazakhstan, ICSID Case No. ARB/01/6ICSID Award, AMCO Asia Corp. et al. v. The Republic of Indonesia, YCA 1992, at 73 et seq.ICSID Award, Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, YCA 1994, at 51 et seq. (also published in: ICSID Rev.-FILJ 1993, at 328 et seq.; ICSID Rep. 1995, at 189 et seq.; ILM 1993, at 933 et seq.; Clunet 1994, at 121 et seq.)Principles / Restatements
Principles of European Contract Law - PECLUNIDROIT Principles of International Commercial Contracts 2016Model Terms
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