FORT LAUDERDALE BUSINESS LITIGATION: MITIGATION OF DAMAGES IN CASES OF BREACH OF CONTRACT

In business litigation cases, parties frequently plead the affirmative defense of “mitigation of damages.” Although commonly referred to as the “duty” to mitigate damages, Florida courts instead refer to this as the doctrine of unavoidable consequences. This legal doctrine prevents a party from recovering those damages inflicted by a wrongdoer which the injured party “could have avoided without undue risk, burden, or humiliation.” Restatement (Second) of Contracts, § 350(1). Precedent from the Supreme Court of Florida in Sys. Components Corp. v. Fla. Dep’t of Transp., 14 So.3d 967 (Fla. 2009), explained that “[t]he doctrine of unavoidable consequences…commonly applies in contract and tort actions…. The doctrine does not permit damage reduction based on what ‘could have been avoided’ through Herculean efforts. Rather, the injured party is only accountable for those hypothetical ameliorative actions that could have been accomplished through ‘ordinary and reasonable care’ without requiring undue effort or expense.” Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Sys. Components Corp. further explained that “[t]here is no actual ‘duty to mitigate’ damages, because the injured party is not compelled to undertake any ameliorative efforts.” Whether the doctrine applies in a given case depends on the facts. A leading legal treatise on the law of contracts, J.D. Calamari and J.M. Perillo, The Law of Contracts sections 14-16 (1977), discussed limits to this doctrine: “If the relation between the parties is such that the wronged party was legally free to enter into similar contracts with others[,] the fact that subsequent to the breach the wronged party could have or actually has made similar contracts in no way reduces the damages to which he is entitled.” In Graphic Associates, Inc. v. Riviana Restaurant Corporation, 461 So.2d 1011 (Fla. 4th DCA 1984), Florida’s Fourth District Court of Appeal explained that: “For example, an employee fired improperly cannot sit idly by and then recover his entire salary. He is required to use reasonable efforts to obtain other suitable employment in order to reduce his damages. Conversely, a new car dealership theoretically has an unlimited number of cars to sell. A purchaser who breaches his contract to buy an automobile is not entitled to credit against claimed damages for other sales of automobiles made by the dealer. The latter situation falls into the category of non-exclusive contracts, an area generally considered as an exception to the requirement of avoiding foreseeable consequences.” Graphic Associates added that “if Graphic [(the appellant)] could have performed the Riviana contract in addition to all of the contracts which it actually did perform[,] then Riviana is not entitled to claim that some or all of those contracts were substitutes for its contract. In other words, there would be no diminution of damages. If performance of the Riviana contract would have precluded Graphic from accepting some or all additional contracts[,] then such potentially excluded contracts are properly considered as substitutes for the Riviana contract and profits therefrom mitigate the damages owed by Riviana to Graphic.”

To preserve its rights, it is essential for the defending party in litigation to assert mitigation of damages as an affirmative defense. However, under Florida law, if the plaintiff made reasonable efforts to avoid the damages caused by the breach of contract, then the jury award should include reasonable amounts that the plaintiff spent for this purpose.

Peter Mavrick is a Fort Lauderdale business litigation lawyer. The Mavrick Law Firm represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.