Oregon Construction Contractors (CCB) Practice Test

What is the term for a non-breaching party's duty to minimize damages resulting from a breach?

1. Liquidation

2. Mitigation

3. Consideration

4. Certainty

The correct answer is: Mitigation

The term for a non-breaching party's duty to minimize damages resulting from a breach is "mitigation." This legal principle requires that when one party suffers a loss due to the breach of a contract by another party, they have an obligation to take reasonable steps to reduce or limit that loss. This means that the injured party cannot simply sit back and allow damages to accumulate without trying to lessen the impact. Mitigation helps to ensure fairness in contractual relationships, as it encourages parties to actively seek alternatives or remedies that might reduce their losses. For example, if a contractor fails to deliver materials on time, the other party should attempt to find substitute materials rather than incurring full damages from the delay. Understanding the duty to mitigate is crucial in contract law, as a party that fails to mitigate their damages may find it difficult to recover the full amount of their claimed losses in any subsequent legal action. The other options do not pertain to this specific duty. Liquidation refers to the process of converting assets into cash or the winding down of a business. Consideration is a fundamental concept in contract law that refers to something of value exchanged between parties. Certainty pertains to the clarity and definiteness of contract terms. Each of these concepts serves different roles