Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Do You Have a Duty to Mitigate Your Losses After a Breach of Contract?

Author: Scarinci Hollenbeck, LLC

Date: April 8, 2020

Key Contacts

Back

When the other party breaches your contract, that doesn’t always mean you’re off the hook…

When the other party breaches your contract, that doesn’t always mean you’re off the hook. Under New Jersey law, a party claiming damages for a breach of contract has an obligation to use reasonable efforts to lessen or reduce the resulting damages.

Do You Have a Duty to Mitigate Your Losses After a Breach of Contract?

What Is Mitigation of Damages?

More specifically, under New Jersey contract law, a party who suffers injury or damage because of a breach must make a reasonable effort to avoid or minimize the loss by taking advantage of any reasonable business or employment opportunities that may be available under the circumstances. If a party fails to mitigate damages, the court may limit or reduce the amount of damages.

By way of example, let’s assume two parties entered into a contractual agreement whereby the breaching party agreed to deliver goods to the other party. If at the time of the expected performance the party does not fulfill the obligation, the non-breaching party has an obligation to attempt to procure the goods by other means in order to fully recover damages.

Contract mitigation also often comes into play when one party breaches a lease agreement. For instance, if a tenant breaks the lease and vacates the premises without legal justification, the landlord must try to rent the property to another tenant as soon as reasonably possible in an effort to limit the losses. Further, the landlord has the burden of proving the reasonableness of the mitigation efforts.

Employees also have a duty to mitigate their losses. In the employment context, a worker who alleges wrongful termination is obligated to attempt to find similar employment. As in the other examples, the failure to do so may result in a reduction of any damages that may be awarded.

What Happens If You Fail to Mitigate Your Losses?

In a breach of contract lawsuit, the defendant has the burden of proving that the plaintiff failed to take reasonable steps to minimize damages. For instance, in a wrongful termination suit, the defendant may argue that the employee failed to pursue subsequent employment opportunities. Specifically, the defendant employer must show that the employee could reasonably have taken advantage of comparable substitute employment and the amount of any such earnings. If the court is satisfied that the employer has satisfied the burden of proof, any subsequent earnings that employee could reasonably have earned if the employee had taken advantage of an available employment opportunity will be subtracted from the damages the employee claims to have suffered as a result of the alleged wrongful termination.

Similarly, in the context of a residential or commercial lease, the defendant may seek to reduce its damages by offering evidence that the landlord did not take actions to re-rent the property and simply let it sit vacant. If that defense is proven, the landlord will not be awarded the full amount of the unpaid rent, and its claim for lost rent will be reduced accordingly.

Key Takeaway

The failure to mitigate your losses can turn a fairly straightforward breach of contract lawsuit into protracted and costly litigation. If you are the victim of a contract breach, you must be diligent about mitigating your losses. While New Jersey courts don’t expect you to make a heroic effort, you must be able to show that your actions were reasonable in the circumstances. Accordingly, it is always advisable to keep records of your efforts to mitigate your damages, i.e. resumes submitted for new jobs, advertisements placed to lease a property, or emails seeking a substitute vendor for goods/services.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Jessica Faustin, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
How Understanding Bankruptcy Trends Can Benefit Your Business post image

How Understanding Bankruptcy Trends Can Benefit Your Business

The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]

Author: Brian D. Spector

Link to post with title - "How Understanding Bankruptcy Trends Can Benefit Your Business"
SEC Takes Actions Against Issuers for Failure to File Form D post image

SEC Takes Actions Against Issuers for Failure to File Form D

In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]

Author: Kenneth C. Oh

Link to post with title - "SEC Takes Actions Against Issuers for Failure to File Form D"
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda post image

Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda

On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]

Author: Matthew F. Mimnaugh

Link to post with title - "Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda"
What Are FIRPTA Withholding Requirements? post image

What Are FIRPTA Withholding Requirements?

If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]

Author: Jesse M. Dimitro

Link to post with title - "What Are FIRPTA Withholding Requirements?"
Does Your Homeowners Insurance Provide Adequate Coverage? post image

Does Your Homeowners Insurance Provide Adequate Coverage?

Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]

Author: Jesse M. Dimitro

Link to post with title - "Does Your Homeowners Insurance Provide Adequate Coverage?"
Understanding the Importance of a Non-Contingent Offer post image

Understanding the Importance of a Non-Contingent Offer

Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]

Author: Jesse M. Dimitro

Link to post with title - "Understanding the Importance of a Non-Contingent Offer"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: