Duty to Mitigate Breach of Contract in Ontario: What It Means for Your Claim

When a contract is broken, the injured party has a legal obligation to act — not just to wait and let losses pile up. In Ontario, the duty to mitigate breach of contract means that a plaintiff must take reasonable steps to reduce the financial harm they suffer as a result of the breach. Fail to do so, and a court will reduce the damages award to reflect the losses that could have been avoided.

This rule can surprise people. Many assume that once the other side breaks the contract, they can simply sit back and sue for everything that goes wrong. The law sees it differently: it expects the innocent party to behave reasonably and economically, even though they did nothing wrong. Understanding mitigation before you pursue a claim — or before you defend one — can significantly change the outcome.

The Basic Rule and Why It Exists

The duty to mitigate is well established in Ontario contract law. Its rationale is straightforward: courts are in the business of compensating genuine losses, not rewarding a plaintiff for sitting on their hands while avoidable harm accumulates. Allowing unlimited damages in those circumstances would create perverse incentives and waste economic resources.

Two important points about the rule:

• The burden of proof rests on the defendant. It is up to the party who breached the contract to show that the plaintiff failed to mitigate — the plaintiff does not have to prove they mitigated perfectly. Once the defendant raises the issue, the plaintiff must then produce evidence of what steps they actually took.
• "Reasonable" is the standard — not perfect. A plaintiff is not required to take heroic measures, accept humiliating terms, or put their own business at serious risk. The question is what a reasonable person in the plaintiff's position would have done.

What Counts as "Reasonable Steps"

Ontario courts look at the specific circumstances when deciding whether a plaintiff's response to the breach was reasonable. There is no universal checklist, but the following factors typically matter:

Promptness. Did the plaintiff act quickly once they became aware of the breach? Delay in finding a substitute supplier, replacement employee, or alternative property can lead to damages being reduced.

Availability of substitutes. If the market offered readily available replacements — goods, services, or workforce — at a comparable price, courts expect the plaintiff to pursue them. Refusing to look for alternatives when they plainly exist will hurt the damages claim.

Cost relative to the benefit. Mitigation steps that would cost more than the loss they prevent are not required. A plaintiff is not expected to spend $80,000 chasing an opportunity to reduce a $20,000 loss.

Risk to the plaintiff's own interests. Courts do not expect plaintiffs to take steps that would expose them to significant legal liability, damage their business reputation, or require them to accept fundamentally different contractual terms from the breaching party.

Common Scenarios: Mitigation in Action

The Wrongfully Dismissed Employee

Employment contracts are governed partly by the common law, and the duty to mitigate is well-developed in that context. When an employer wrongfully dismisses an employee, the employee is entitled to damages for the reasonable notice period — but they must take reasonable steps to find comparable employment during that period.

What "comparable" means depends on the individual: their seniority, industry, location, and salary. An executive is not expected to take a minimum-wage service job. But an executive who makes no applications at all, or who restricts their search to a single narrow job category, may find their damages reduced because a court concludes they could have found something if they had tried.

Importantly, the employee is not required to accept a position offered by the same employer who dismissed them, particularly if the offer is demeaning or the working relationship has become poisoned.

The Cancelled Purchase Order

Suppose a manufacturer agrees to supply 10,000 units of a product over six months, and the buyer cancels the order after month two. The manufacturer has a duty to mitigate.

Reasonable steps might include:

• Reaching out to other buyers in the market to sell the remaining planned production
• Scaling back production to avoid manufacturing goods that cannot be sold
• Redirecting materials to other orders already in the pipeline

If the manufacturer ignores the cancellation, keeps producing 10,000 units with no market for them, and then sues for the full contract price, a court is likely to reduce the award to reflect the losses that a reasonable business would have avoided.

The Tenant Whose Landlord Repudiates a Lease

If a commercial landlord wrongfully evicts a tenant or repudiates a lease, the tenant must take reasonable steps to find comparable replacement premises. The tenant cannot simply refuse to look and claim the full remaining rent for years of lost occupancy.

On the flip side, if suitable replacement premises are genuinely scarce in the relevant market, or significantly more expensive, the court will take that into account when assessing whether the tenant mitigated adequately.

Consequences of Failing to Mitigate

When a defendant successfully shows that the plaintiff failed to take reasonable mitigation steps, the court will reduce the damages award by the amount of loss that could have been avoided. This is not a penalty — it is simply the court refusing to compensate for harm the plaintiff brought on themselves by inaction.

In practice, the reduction can be substantial. In employment cases, courts have sometimes cut damages in half or more when a plaintiff made only token efforts to find new work. In commercial contract disputes, a plaintiff who warehouses unsaleable inventory rather than pivoting may recover only a fraction of claimed losses.

There is also a related but distinct concept: if the plaintiff actually succeeds in mitigating — and in doing so earns income or avoids costs — those gains are credited against the damages claim. The goal is to put the plaintiff in the position they would have been in, not to enrich them.

Can a Plaintiff Recover Mitigation Costs?

Yes. Reasonable expenses incurred in the course of mitigation are recoverable as part of the damages claim, even if the mitigation effort was not entirely successful. For example, if a dismissed executive pays a career coach and attends networking events as part of a genuine job search, those costs are a legitimate part of the damages — provided the steps were objectively reasonable.

Frequently asked questions