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Last updated: 21-Jun-2015

Criterion for mitigation set out by Lord Macmillan in Banco De Portugal v Waterlow [1932] AC 452:

Where the sufferer from a breach of contract finds himself in consequence of that breach placed in position of embarrassment, the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult position by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.

By Lord Justice Pearson in Darbishire v Warran [1963] 1 W.L.R. 1067 at p. 1075:

The plaintiff is not under any actual obligation to adopt the cheaper method: if he wishes to adopt the more expensive method, he is at liberty to do so and by doing so he commits no wrong against the defendant or anyone else. The true meaning is that the plaintiff is not entitled to charge the defendant by way of damages with any greater sum than that which he reasonably needs to expend for the purpose of making good the loss. In short, he is fully entitled to be as extravagant as he pleases, but not at the expense of the defendant.

Sotiros Shipping Inc. v Sameiet Solholt [1983] 1 Lloyd’s Rep. 605 per Sir John Donaldson, M.R. at p. 608:

But the duty to mitigate, though invariably described as a duty, is not an obligation which gives rise to a cause of action.

MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] EWHC 283 (Comm) per Leggat J at para 59:

59.The rules governing mitigation of damages for breach of contract are well established. They can be summarised as follows:

i) Despite the common use of the phrase "duty to mitigate", in the absence of a contrary agreement a claimant is free to act as it wishes following a breach of contract by the defendant and does not owe any obligation to the defendant to mitigate its loss: see e.g. Darbishire v Warran [1963] 1 WLR 1067, 1075; Sotiros Shipping Inc v Samiet Solholt (The Solholt) [1983] 1 Lloyd’s Rep 605, 608. However, the general principle is that the damages recoverable for a breach of contract are to be calculated as if the claimant had acted reasonably to mitigate its loss: see Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 353, 370, para 10. I will refer to this as the "mitigation principle".

ii) The burden of proof is on the defendant to show that there were steps available to the claimant to take which would have avoided all or an identifiable part of its loss, and that it is reasonable to expect that someone in the claimant’s position would have taken those steps: Roper v Johnson (1873) LR 8 CP 167; Standard Chartered Bank v Pakistan National Shipping Corp [2001] 1 All ER (Comm) 822 at para 38.

iii) The standard of reasonableness to be applied is not an exacting one having regard to the fact that the claimant’s predicament has been caused by the defendant’s wrongdoing: Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452, 506.

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