(b) The duty to mitigate losses
This rule relates to the rule that the injured party in the situation of a breach of contract is under a duty to take all reasonable
steps to minimise their loss. The operation of the rule means that the buyer of goods that are not delivered, as required under
the terms of a contract, has to buy the replacements as cheaply as possible. Correspondingly, the seller of goods that are not
accepted in line with a contractual agreement has to try to get as good a price as they can when they sell them.
In Payzu v Saunders (1919), the parties entered into a contract for the sale of fabric, which was to be delivered and paid for
in instalments. When the purchaser, Payzu, failed to pay for the fi rst instalment on time, Saunders refused to make any further
deliveries unless Payzu agreed to pay cash on delivery. The plaintiff refused to accept this and sued for breach of contract. The
court decided that the delay in payment had not given the defendant the right to repudiate the contract. As a consequence, he
had breached the contract by refusing further delivery. The buyer, however, should have mitigated his loss by accepting the
offer of cash on delivery terms. His damages were restricted, therefore, to what he would have lost under those terms, namely,
interest over the repayment period.
In Western Web Offset Printers Ltd v Independent Media Ltd (1995), the parties had entered into a contract under which
the plaintiff was to publish 48 issues of a weekly newspaper for the defendant. In the action, which followed the defendant’s
repudiation of the contract, the only issue in question was the extent of damages to be awarded. The Court of Appeal decided
that as the claimant had been unable to replace the work due to the recession in the economy and, therefore, had not been
able to mitigate the loss, it was entitled to receive the full amount that would have been due in order to allow it to defray the
expenses it would have had to pay during the period the contract should have lasted.
However, in relation to anticipatory breach of contract the injured party can wait until the actual time for performance before
taking action against the party in breach. In such a situation, they are entitled to make preparations for performance, and claim
the agreed contract price, even though this apparently confl icts with the duty to mitigate losses (White and Carter (Councils) v
McGregor (1961)). |
