This paper explores the policy and operation of the doctrine of mitigation in contract law. It assesses how it fits with contract more broadly and other aspects of contract damages (remoteness and date of assessment). The main policy behind mitigation is to incentivise self-help on the part of the party best placed to avoid loss. In practice, the assessment of when it becomes reasonable to mitigate mostly depends upon the subject matter of the contract, and the liquidity of the market. Courts must know what the available market was in order to calculate the relevant counterfactual inquiry. In a highly liquid market for goods, mitigation is presumed in the basic measure of loss for sale of goods, and damages are measured as at the date of breach. However. the situation may be different in at least three situations: first, where a plaintiff is legally or practically ‘locked out’ of the market; second, where the market is not liquid; and third, where a plaintiff is ‘locked in’ for reasons other than financial ones. In a fourth situation, where a plaintiff is ‘locked in’ for financial reasons, the policy aspects are more complex.
Katy Barnett, ‘Mitigation and Remoteness in Contract: Policy and Principle’ (2019) 36(1) Journal of Contract Law 5.