Mitigation of Loss Contract Law Malaysia

Mitigation of Loss in Contract Law: Understanding its Application in Malaysia

In contract law, the principle of mitigation of loss plays a crucial role in determining the amount of damages that a party may recover for breach of contract. Essentially, this principle requires the injured party to take reasonable steps to minimize its losses resulting from the breach. Failure to do so may result in a reduction of the damages awarded by the court. In Malaysia, the principle of mitigation of loss has been applied in numerous cases, and its importance cannot be overstated.

The Principle of Mitigation of Loss

The principle of mitigation of loss is rooted in the concept of reasonableness. Specifically, it requires the injured party to act reasonably in mitigating its losses following a breach of contract. This means that the party must take all reasonable steps to reduce the damage that it suffers as a result of the breach. Failure to take such steps may result in the party being unable to recover the full amount of damages that it would otherwise be entitled to.

The application of the principle of mitigation of loss is not limited to any particular type of contract or breach. Rather, it is a general principle that applies to all contracts and all breaches, whether they be minor or major. The principle is also not limited to any particular type of damages. Rather, it applies to all types of damages, including direct and indirect damages, and even to loss of profit.

The Application of Mitigation of Loss in Malaysia

The principle of mitigation of loss has been applied in numerous cases in Malaysia. For example, in the case of Leong Cheong Iron Works Sdn Bhd v Samlit Steel Works (M) Sdn Bhd [1998] 3 MLJ 233, the court held that the plaintiff had failed to take reasonable steps to mitigate its loss, and therefore, the damages awarded were reduced. Similarly, in the case of S.T. Diamond Chain Sdn Bhd v Anwar bin Mansor & Ors [2018] 9 CLJ 207, the court held that the plaintiff had failed to mitigate its loss by not taking steps to sell the goods that had been wrongfully detained by the defendants.

In Malaysia, the application of the principle of mitigation of loss is closely linked to the concept of foreseeability. Essentially, if the injured party could have foreseen the potential loss resulting from the breach, then it has a duty to mitigate that loss. Failure to do so may result in a reduction of the damages awarded by the court. However, it is important to note that the injured party is only required to take reasonable steps to mitigate its losses. It is not required to take all possible steps or to pursue every available option.

Conclusion

In summary, the principle of mitigation of loss is a fundamental aspect of contract law in Malaysia. It requires the injured party to take reasonable steps to minimize its losses following a breach of contract. Failure to do so may result in a reduction of the damages awarded by the court. The principle of mitigation of loss has been applied in numerous cases in Malaysia, and its importance cannot be overstated. Therefore, it is essential for parties to contracts in Malaysia to understand and apply this principle in order to protect their interests and ensure that they recover the appropriate amount of damages in the event of a breach.