Mitigation of Damages in California Contract Cases: What the Non-Breaching Party Must Do

Last updated: November 2026

Mitigation of damages is the rule that a party injured by a breach of contract cannot recover losses it could have avoided through reasonable effort and without undue expense. In California the injured party must take reasonable steps to limit its loss, but it need not take steps that are unreasonable, impractical, or disproportionately costly. The breaching party bears the burden of proving that the loss could have been avoided. Kolmogorov Law, P.C. litigates this issue for plaintiffs and defendants in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a contract claim where mitigation is in dispute.

The mitigation of damages rule and why it exists

Contract damages compensate the injured party for the detriment proximately caused by the breach or likely to result from it in the ordinary course of things. (Civ. Code, § 3300.) The mitigation rule, sometimes called the doctrine of avoidable consequences, trims that measure. A party injured by a breach is required to do everything reasonably possible to reduce its own loss, and it cannot recover for harm it could have foreseen and avoided by reasonable effort without undue expense. (Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990) 226 Cal.App.3d 442, 460.)

The reason is simple. Damages are meant to put the injured party where performance would have left it, not to reward passivity. A supplier whose customer cancels an order should try to sell the goods elsewhere, not let them rot and bill the customer for the full price.

It is not really a duty. Nobody can sue you for failing to mitigate. The consequence is that the avoidable portion of the loss comes off the award.

What the injured party must actually do

The standard is reasonableness, judged at the time and in the circumstances. The injured party need not make extraordinary efforts or do what is unreasonable or impracticable; reasonable diligence and ordinary care are enough. Whether it acted reasonably is a question of fact that considers time, knowledge, opportunity, and expense. (Brandon & Tibbs, supra, 226 Cal.App.3d at p. 466.)

Reasonable efforts that fail still count. The injured party is not barred from recovery because its attempts to reduce the loss did not work. (Brandon & Tibbs, supra, 226 Cal.App.3d at p. 460.) And the cost of those efforts is itself recoverable as part of the damages.

The injured party is not required to spend money it does not have, to take on new risk, or to accept a replacement deal on materially worse terms. Nor must it do business with the breaching party on new terms, though an unreasonable refusal of a fair offer can be held against it.

Doing nothing and hoping is the one approach that usually fails.

Who has to prove it

The burden of proving that losses could have been avoided by reasonable effort and expense rests on the party who broke the contract. (Brandon & Tibbs, supra, 226 Cal.App.3d at p. 460.) Failure to mitigate is pleaded as an affirmative defense, and the defendant must come forward with evidence of what the plaintiff should have done and what it would have saved.

That allocation matters at trial. A defendant that simply argues the plaintiff "could have done more" usually gets nowhere. A defendant that proves the plaintiff turned down a comparable replacement contract has a real defense. Our defenses page covers how this fits with the others.

Two settings where the statute spells it out

Commercial leases. When a tenant breaches and abandons, or the landlord terminates for breach, the landlord may recover unpaid rent earned before termination plus the rent that would have come due afterward. But the post-termination amounts are reduced by the rental loss the tenant proves could have been reasonably avoided. (Civ. Code, § 1951.2, subd. (a)(2), (3).) Rent for the balance of the term after judgment is recoverable only if the lease so provides or the landlord relet the property and proves it acted reasonably and in good faith to mitigate. (Civ. Code, § 1951.2, subd. (c).) The tenant carries the burden on avoidable loss, but a landlord with no reletting file is in a weak position. Our commercial lease guide covers the rest of the statute.

Sales of goods. A buyer whose seller fails to deliver may "cover" by making, in good faith and without unreasonable delay, a reasonable substitute purchase, and recover the difference between the cover price and the contract price plus incidental and consequential damages. (Com. Code, § 2712, subds. (1), (2).) Failure to cover does not bar other remedies (Com. Code, § 2712, subd. (3)), but consequential losses the buyer could have prevented by covering are generally not recoverable.

How the issue comes up for business owners

A staffing company loses a two-year placement contract when the client terminates without cause. The company keeps the three assigned employees on payroll for eight months while the dispute festers. The client argues the company should have reassigned or released them within sixty days. Much of the payroll claim is at risk.

A manufacturer's largest customer repudiates a purchase order for custom parts. The manufacturer finishes the run anyway, then sues for the full price. The customer argues the manufacturer should have stopped production when it received the repudiation. The materials bought after notice are hard to recover.

In each case the injured party had a strong liability claim and a damages problem it created itself.

What to do when the other side breaches

Write down what you did and when. Document the search for replacements, the offers received and why they were rejected, and the costs incurred in the attempt. The question at trial is whether you acted reasonably at the time, and contemporaneous records answer it far better than testimony two years later.

Then measure the claim honestly. Our contract damages page explains the categories, and our lost profits page covers the proof problems that mitigation arguments often target. Where the dispute is a simple unpaid balance, mitigation rarely applies, and our unpaid invoices page is the better starting point.

What we do, and where these cases are heard

For plaintiffs, we build the mitigation record early so the defense has nothing to work with. For defendants, we identify the specific alternatives the plaintiff ignored and quantify what they would have saved. Cases are heard in the Orange County Superior Court's Central Justice Center in Santa Ana, the Los Angeles Superior Court's Stanley Mosk Courthouse, or the Central District of California where federal jurisdiction exists. Our breach of contract practice page describes the broader work.

What to bring to the first meeting

Bring the contract, the notice of breach or termination, a timeline of what you did afterward to reduce the loss, records of replacement offers made or received, and the costs of your mitigation efforts.

Frequently asked questions

What is the duty to mitigate damages in California?

A party injured by a breach of contract must do everything reasonably possible to reduce its loss and cannot recover for harm it could have avoided by reasonable effort without undue expense. (Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990) 226 Cal.App.3d 442, 460.) It does not require extraordinary, impractical, or disproportionately expensive steps.

Who has the burden of proving failure to mitigate?

The breaching party. It must prove that the losses could have been avoided by reasonable effort and expense. (Brandon & Tibbs, supra, 226 Cal.App.3d at p. 460.) Failure to mitigate is pleaded as an affirmative defense, and a defendant that cannot identify a specific reasonable alternative and what it would have saved generally does not carry the burden.

Does a commercial landlord have to mitigate in California?

In effect, yes. A landlord's recovery of rent for the period after termination is reduced by the rental loss the tenant proves could have been reasonably avoided. Rent for the balance of the term after judgment is recoverable only if the lease provides for it or the landlord relet in a reasonable, good-faith effort to mitigate. (Civ. Code, § 1951.2, subds. (a), (c).)

Does the mitigation of damages rule defeat the whole claim?

No. It reduces the recoverable damages by the amount that reasonable effort would have avoided. Liability for the breach is unaffected, and the plaintiff still recovers the losses that could not reasonably have been prevented, plus the reasonable cost of its mitigation efforts.

Do I have to accept a worse deal from the party who breached?

Generally no. The injured party is not required to accept a replacement arrangement on materially worse terms or to take on new risk, and it need not deal with the breaching party at all. An unreasonable refusal of a fair, comparable offer can be held against it, though, so refusals should be documented with reasons.

Talk to a California breach of contract attorney

If your business is pursuing or defending a contract claim where mitigation is in play, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the facts, and the court.