Breach Of Contract Damages For Derogation From The Rules

The principle of mitigation arose from Common law with a long history. Nowadays it has been adopted popularly in legislations and cases around the world as an amendment to the principle of full compensation damages. In China, this rule has been stipulated in our legal system as well. Article 114 of The General Principles of the Civil Law of PRC set up mitigation principle at the first time, moreover Article 119 of the Contract Law of PRC further developed this principle. But the provisions concerning the principle of mitigation are fundamental and recapitulative. This principle shall be concretization in practice. It is lack of theoretic researches on analysis of mitigation principle and the courts only quote this principle to solve the cases without deep considerations.The author tries to build up a comprehensive introduction of the principle of mitigation through starting from the legal characters and its theoretic basis, focusing on the analysis of the reasonableness and major measures to mitigate the losses, comparing the principle of mitigation with other related ones, discussing the influence of this principle on the limitation of the non-breaching party's options on remedies out of the breach, and to provide reference for the correct cognition in theory and appropriate use of the principle of mitigation in practice. Because this principle arose from Common Law, the author mainly uses many British and American cases as material resources and tries to conclude the development process of such principle in the Case Law.This article comprises five chapters. In the first chapter, the author focuses on the meaning, legal characters, theory basis of the principle of mitigation, and points out that this principle is the concretization of good faith and it functions to promote the cooperation among the parties and acts as the incentive for the injured party to conduct in the manner of promoting the economic benefits and reducing property waste.The second chapter initiates the core issue of the principle of mitigation, what is the "reasonableness". In this part, two standards are set up, i.e. "reasonable person standard" and "good faith standard". Furthermore, the objective factors, including cost, suitability, market factor and the character of the contract, shall be taken into consideration on using "good faith standard".The third chapter analyzes the major measures to mitigate the losses in the Case Law and specifies the situations of the major measures——stopping performance,arranging substitution transactions, accepting the new offer from the breaching party and continuing performance.The fourth chapter states and interprets the relationship between the principles of mitigation and the related ones, mainly focusing on the following three issues: the relationship between the principle of mitigation and comparative negligence; the application of the Break-Even Rule of Profit and Loss to the benefits resulting from the mitigation measures depends on the existence of the causal relationship; the limitation to the non-breaching party's optional rights of choosing to continue performance as remedy due to the principle of mitigation in the anticipatory breach.The fifth chapter focuses on how to apply the principle of mitigation in China. In this chapter, the author emphasizes the analysis of the objective conditions under which the principle of mitigation is applicable, of the application of this principle in the remedy method of continuing performance chosen by the non-breaching party after actual breach of contract, of the judgment of the reasonableness and of the burden of the expenses happened during the process to take actions for the purpose of mitigating the losses.