The doctrine of mitigation is a pervasive contractual legal principle in jurisdictions around the world. It arises from the fact that parties to a contract share a legal relationship in which obligations are expected from either party, and a breach of a contractual obligation may lead to damages and loss suffered by the non-breaching party, which may establish liability on the breaching party provided there is a causal link between the breach and loss. In this article, we consider why the legal system incorporates ‘mitigation of damages' before turning to how Bahraini law indirectly addresses the concept under Decree Law 19/2001 Issuing the Civil Code (BCC). We additionally consider the role of the Claimant or injured party's conduct in being a key representation of the court's scrutiny of the Claimant when assessing the damages to be awarded to the same.

Why Have a Concept of Mitigation?

Mitigation of damage is widely framed as a ‘duty of mitigation', especially in common law systems. However, mitigation in essence rests on two ideas: (i) that a party should not recover losses it could and ought to have avoided by taking reasonable steps, and (ii) that party should not benefit as a result of the other party's breach. It is this second aspect that gives rise to ‘contributory fault' as a means of reducing the damages to be awarded if a fault by the non-breaching party is established.

Under the mitigation doctrine, the non-breaching party must take positive (reasonable) steps to limit or minimize the loss that would have been sustained which stems from the other party's breach. This means that the non-breaching party may not – through his inaction – allow the losses or harm to accrue which may eventually lead to massive losses including those that are too remote to recover under law.

Taking ‘reasonable' steps to minimize losses is typically not a very high standard, especially as the Claimant is in a position of pressure and urgency to act quickly; a position that the Claimant is in due to the Defendant's breach of contract.

‘Mitigation' under Bahraini law

Bahraini law, akin to neighbouring GCC and civil law jurisdictions generally, addresses the mitigation of damages doctrine indirectly. One way this is most evident is Article 223 BCC, which stipulates:

“If compensation was not quantified in the contract or by a provision in the law, the judge shall quantify it. Compensation shall include the loss suffered, and profit lost by the creditor, provided that they are a natural result of the non-performance or delay in performance of the obligation. A loss shall be considered a natural result if the creditor could not have avoided it by exerting reasonable efforts.

However, if the source of the obligation is the contract, the debtor, who has not committed fraud or gross fault, shall not be obliged to compensate except the damage which was habitually foreseeable at the time of the contract”.

The above provision does not outright require the injured party – as under a ‘duty' to mitigate – to minimize losses. Rather, as part of the comprehensive assessment by the court, the Claimant's envisaged efforts at avoiding the loss are used to determine the remoteness of the harm and whether or not damages for said loss should be recovered. However, this does not leave the injured party free from potential scrutiny as the breaching party or Defendant may seek to establish a fault by the Claimant, which we consider below.

Claimant's Contributory Fault

The Claimant's conduct after the Defendant's breach – if disputed by the latter – may fall for the court's scrutiny to determine whether the compensation to the Claimant ought to be reduced to reflect his role in the harm suffered by the same. The court's authority in this regard is enshrined by Article 217 BCC, which stipulates:

“The court may, to the extent of the creditor's fault, decrease the compensation due to the creditor where his error, in addition to the debtor's fault, had contributed to the infliction of harm.”

The burden of establishing the Claimant's fault lies with the Defendant and is therefore not an exercise generally adopted by the court on its own initiative since it may draw inferences from the evidence presented before it. Establishing a Claimant's fault after a breach of contract is a high threshold and it is not common for the Court of Cassation to exercise its powers under Article 217 BCC. It is to be noted that the element of ‘fault' may be construed openly and would include a positive act or an omission. As such, if a Claimant willfully refrains from taking action to prevent the accumulation of damage or harm even where said action does not entail excessive cost, the courts may find that the Claimant had – by way of contributory fault – contributed to the harm suffered and therefore may not recover the extent of damages that may have been awarded without the Claimant's wrongful conduct.

Concluding remarks

Although it is difficult to frame mitigation of damages as an outright duty under the local legal system, it is evident that the injured party's conduct does play a role in the assessment of damages for harm suffered as a result of the Defendant's breach of contract. This was exemplified by Articles 217 and 223 BCC, which together suggest that the Claimant ought to try to reduce the harm being sustained following the Defendant's breach as their conduct in the wake of said breach is not irrelevant. This varies depending on the relationship or transaction in question, such as a supply of goods and services contract, construction and muqawala, although mitigation is important in each of these.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.