Document-Id: 949000, Please cite as: "http://www.trans-lex.org/949000"

Principle

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.

CommentaryReferencesContract ClausesDiscussion

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.


Please cite as: "Commentary to Trans-Lex Principle , http://www.trans-lex.org/949000"
 

References

 

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Arbitral AwardsDoctrineInternational LegislationModel LawsModel TermsNational LegislationPrinciples / Restatements

Arbitral Awards

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, 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.) 

Doctrine

Blessing, Marc, Das neue internationale Schiedsgerichtsrecht der Schweiz - Ein Fortschritt oder ein Rückschritt?, in: Böckstiegel (ed.), Die internationale Schiedsgerichtsbarkeit in der Schweiz (II), Cologne, Berlin, Bonn, Munich 1989, at 13 et seq.Braeckmans, H., Paralegale Normen En Lex Mercatoria, 23 TvPr. 1986, at 1 et seq.Bucher, Andreas, Die neue internationale Schiedsgerichtsbarkeit in der Schweiz, Basel, Frankfurt a.M. 1989Craig, W. Laurence/ Park, William W./ Paulsson, Jan, International Chamber of Commerce Arbitration, 3rd ed., Dobbs Ferry 2000Dasser, Felix, Internationale Schiedsgerichte und Lex Mercatoria, Zürich 1989Derains, Yves, L‘Obligation de Minimiser le Dommage dans la Jurisprudence Arbitrale, RDAI 1987, at 375 et seq.Derains, Yves, note to ICC Award No. 2404, Clunet 1976, at 996 et seq.Derains, Yves, note to ICC Award No. 5514, Clunet 1992, at 1029 et seq.Derains, Yves, note to ICC Award No. 5910, Clunet 1988, at 1220 et seq.Derains, Yves, note to ICC Award No. 6840, Clunet 1992, at 1034 et seq.Domingo, Ortega, Rodriguez-Antolin, Zambrana, Principios de Derecho Global, Navarra, 2006Ferrari, Franco, Das Verhältnis zwischen den Unidroit-Grundsätzen und den allgemeinen Grundsätzen internationaler Einheitsprivatrechtskonventionen, JZ 1998, at 9 et seq.Ferrari, Franco, The CISG's Interpretative Goals, Its Interpretative Method and Its General Principles in Case Law (Part II), IHR 5/2013, at 181 et seq.Fouchard Gaillard Goldman on International Commercial Arbitration (edited by Emmanuel Gaillard and John Savage) The Hague 1999Gaillard, Emmanuel, note to ICC Award No. 3344, Clunet 1982, at 983 et seq.Goldman, Berthold, The Applicable Law: General Principles of Law - the Lex Mercatoria, in: Lew (ed.), Contemporary Problems in International Arbitration, London 1986, at 113 et seq.Hascher, Dominique, note to ICC Award No. 5865, Clunet 1998, at 1015 et seq.Herber, Rolf/ Czerwenka, Beate, Internationales Kaufrecht, Munich 1991Jenks, Edward et al., A Digest of English Civil Law, London, Sydney, Calcutta, Winnipeg, Wellington 1921.Loquin, La réalité des usages du commerce international, RIDéco 1989, at 163 et seq.Lowenfeld, Andreas F., Lex Mercatoria: An Arbitrator's View, Arb.Int’l 1990, at 133 et seq.Magnus, Ulrich, Die allgemeinen Grundsätze im UN-Kaufrecht, 59 RabelsZ 1995, at 469 et seq.Marrella, Fabrizio, La nuova lex mercatoria, Principi Unidroit ed usi di contratti des comercio internazionale, CEDAM, Tratto di dritto commerciale e di dritto publico dell‘economia, Volume 30, Padova 2003Mayer, Pierre, Le Principe de Bonne Foi devant les Arbitres du Commerce International, in: Festschrift Pierre Lalive, Basel, Frankfurt a.M. 1993, at 543 et seq.Molineaux, Charles, Moving Toward a Lex Mercatoria - A Lex Constructionis, 14 J. Int‘l Arb. 1997, No. 1, at 55 et seq.Mustill, Michael, The New Lex Mercatoria: The First Twenty-five Years, Arb.Int'l 1988, at 86 et seq.Note to ICC No.2478, Clunet 1975, at 916 et seq.Ortscheidt, Jérôme, La réparation du dommage dans l'arbitrage commercial international, Paris 2001.Osman, Filali, Les Principes Généraux de la Lex Mercatoria, Paris 1992Paulsson, Jan, La Lex Mercatoria dans l‘Arbitrage C.C.I, Rev.d.Arb. 1990. at 55 et seq.Romero, Eduardo Silva, Note to ICC Award No.12193; Clunet 2007, at 1286 et seq.Schlechtriem, Peter (ed.), English Commentary on the UN Convention on the International Sale of Goods (CISG), Comment on Art. 7 by Rolf Herber, Oxford 1998Tallon, Denis, Damages, Exemption Clauses, and Penalties, 40 Am.J.Comp.L. 1992, at 675 et seq.Wühler, Norbert, Application of General Principles of Law, in van den Berg (ed.), Planning efficient Arbitration Proceedings - The Law Applicable in International Arbitration, p. 553 et seq. 

International Legislation

UNIDROIT Convention on International Financial Leasing (Ottawa, 20 May 1988).United Nations Convention on Contracts for the International Sale of Goods (CISG) 

Model Laws

A Contract Code: Drawn up on Behalf of the English Law CommissionOHADA Uniform Act Relating to General Commercial Law (Translation) 

Model Terms

UNECE-General Conditions for the Supply of Plant and Machinery for Export.Standard Contracts for the UK Offshore Oil & Gas Industry, General Conditions of Contract (including Guidance Notes) for Marine Construction, 2nd Ed., Aberdeen 2004, at 1 et seq. (available at: http://www.logic-oil.com/contracts.cfm) 

National Legislation

Civil Code QuébecContract Law of the People's Republic of ChinaEgyptian Civil CodeEthiopian Civil CodeGIW GDRNieuw Burgerlijk Wetboek - New Netherlands Civil Code ( Dutch Civil Code )Russian Civil Code 

Principles / Restatements

Principles of European Contract Law - PECLUNIDROIT Principles of International Commercial Contracts 

Contract Clauses

 

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1. Lack of ConformityConstruction & O&M Contract2. Execution of Contract (General)Sales & Purchase ContractConstruction & O&M ContractAsset Management Agreement3. Force MajeureConstruction & O&M Contract4. Contractual Exclusion of Duty to MitigateEmployment ContractSales & Purchase ContractMortgage Financing ContractChange of Control Agreement
1. Lack of ConformityConstruction & O&M ContractImmediate Measures to Avoid Damages
If, in case of a defect for which the Contractor is liable, (...) the risk of damage is such that immediate measures are required, and the Contractor is not able to remedy the defect forthwith, then the Purchaser shall take any measures which are required to avoid or limit damage to the Works. The Purchaser shall be entitled to compensation for the reasonable costs of such measures.
2001
 2. Execution of Contract (General)Sales & Purchase ContractAdditional Indemnification Provisions
(...) all Losses shall be net of any third-party insurance proceeds recovered in cash, net of directly related premium adjustments, by the Indemnified Party in connection with the facts giving rise to the right of indemnification, and (b) each party shall use reasonable efforts to mitigate any Losses for which that party seeks indemnification pursuant to this Article X (...)
2010
General Agreement to Indemnify
(...) Both parties shall mitigate their damages.
2011
 Construction & O&M ContractLimiting Damage
Each party shall forthwith inform the other when damage has occurred or there is risk of damage for which the other party is liable. The first named party shall also be obliged to take any measures which are necessary to prevent or limit such damage. If he fails to do so the other party shall be entitled to a reduction of damages.
2001
 Asset Management AgreementForce Majeure
(...) A party that claims that the performance of this Agreement is objectively impossible and impractical due to such event of force majeure shall take any reasonable measures to lessen the losses caused by such event of force majeure.
2003
 3. Force MajeureConstruction & O&M ContractForce Majeure
The Party or parties affected by the event of Force Majeure shall use reasonable efforts to mitigate the effects thereof upon its or their performance of the Contract and to fulfill its or their obligations under the Contract (...)
1997
 4. Contractual Exclusion of Duty to MitigateEmployment ContractNo Duty to Mitigate

The Employee shall not be required to mitigate the value of any benefits contemplated by this Agreement, nor shall any such benefits be reduced by any earnings or benefits that the Employee may receive from any other source. 


2012
 Sales & Purchase ContractClaims vis-a-vis the Sellers
Any claim vis-a-vis any of the Sellers under or in connection with this Agreement are excluded, if and to the extent (...) the claim or the amount of the claim does result from a failure of the Purchaser or any Company of the Group to mitigate the damage pursuant to Section 254 of the German Civil Code after the Closing Date.
2004
 Mortgage Financing ContractNo Duty to Mitigate

Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source. 


2004
 Change of Control AgreementNo Duty to Mitigate

Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source. 


2012
 

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