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Contract: Remedies

Mitigation, agreed damages and penalties

  • 3 things to know
  • A2 Units 3 and 4

Overview

Duty to mitigate, liquidated damages clause and penalty clause.

What you need to know

Answer each one before you reveal it.

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Key term

What is the duty to mitigate?

Key term

What did British Westinghouse v Underground Electric Railways (1912) decide about the benefits of mitigation?

Key term

When can a defendant rely on the claimant's own carelessness to reduce contractual damages?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is the duty to mitigate?

    Model answer

    The injured party must take reasonable steps to reduce the loss flowing from the breach, and cannot recover for any part of the loss that reasonable steps would have avoided.

  2. 2

    What did British Westinghouse v Underground Electric Railways (1912) decide about the benefits of mitigation?

    Model answer

    The replacement turbines were so much more efficient than those contracted for that the buyer was better off, and the savings had to be brought into account, reducing the damages for the defective machines.

  3. 3

    What did Pilkington v Wood (1953) decide about the extent of the duty to mitigate?

    Model answer

    It decided that the injured party need not take unreasonable steps, so a purchaser given defective advice on title was not required to bring uncertain and expensive litigation against the vendor to reduce his loss.

  4. 4

    Who bears the burden of proving a failure to mitigate?

    Model answer

    The defendant must prove that the claimant acted unreasonably, because the claimant is not required to justify every choice made in the difficult position the breach created.

  5. 5

    Does the duty to mitigate arise before an anticipatory breach has been accepted?

    Model answer

    No, the innocent party is entitled to wait and keep the contract alive, so the duty to mitigate arises only once the repudiation has been accepted and the contract brought to an end.

  6. 6

    When can a defendant rely on the claimant's own carelessness to reduce contractual damages?

    Model answer

    Apportionment for contributory negligence is available only where the defendant's liability in contract is the same as, and concurrent with, a liability in the tort of negligence, and not where the contractual duty is strict.

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