Understanding Mitigation Obligation: Navigating Construction Industry Delays and Disruptions with Expertise

The term “mitigation” is commonly associated with adverse situations, signifying the act of reducing their severity and consequences. Within the context of project delays, it pertains to lessening the impact of delay events, thus reducing resulting losses and expenses. Although the definition of mitigation in Construction appears clear, deeper exploration reveals misunderstandings concerning its application relative to contractual obligations.

There were occasions where disputes have arisen due to contentious interpretations of mitigation obligations by Contract Administrators representing owners, prime Contractors, and Subcontractors. A recurring question is whether the prime contractor must expend resources to mitigate employer delays, or if Subcontractors should spend to mitigate prime contractor delays. Conversely, Employers/Prime contractors may employ mitigation as a defense against Contractors'/Subcontractor delay and disruption claims, sometimes even to undermine valid claims.

It has been observed that Contract administration professionals struggle to determine the scope and limitations of mitigation measures sometimes. Indeed, the extent of the mitigation obligation, if expressly stated, is governed by the provisions of the respective contract/subcontract, and if the same does not contradict the implied legal obligation. Nevertheless, the application of the contractual/legal provisions pertaining to mitigation seems to be widely misunderstood.

Mitigation encompasses actions that make conditions or consequences less severe, encompassing measures to reduce financial losses, expenses, disruptions, or delay impacts. In legal terms, it relates to recovery of damages, seeking to reduce the impact of delays, disruptions, or damages. Though distinctions exist between mitigating delay and mitigating losses/expenses, they can be used interchangeably due to shared underlying principles, particularly as delays eventually lead to financial ramifications.

In these scenarios, a claimant's or innocent party's ability to recover losses, damages, or additional time following delay, disruption, or breach is limited to the extent their unreasonable actions or inaction exacerbated the losses. Stated differently, the law will not consider the claimant’s loss as causally attributed to the other party’s breach/default to the extent that the other party could reasonably have taken steps to avoid or reduce the loss[1].

To illustrate the same, consider a case where water leaks from an overhead pipeline during building testing due to defective subcontractor piping. The prime contractor fails to protect floors and ceilings, leading to damage requiring repairs before handover. In such instances, the prime contractor cannot fully recover damages or blame the Subcontractor for the entire delay and damages. However, taking steps to mitigate, such as catching the leaking water, allows the contractor to recover expenses and ceiling damages. If the prime contractor neglects to prevent the loss, their own failure to mitigate, rather than the Subcontractor's breach, becomes the effective cause of their loss.

This involves two aspects: firstly, contractors must reasonably minimize losses, and secondly, they must avoid actions that exacerbate losses.[2]

[1] ?Mobil North Sea Limited, Fluor Enterprises Limited (Formerly Fluor Daniel Limited) v PJ Pipe & Valve Company (Trading as PJ Valves or PJ Valve Ltd) [2001] EWCA Civ 741 at [30]

[2] SCL protocol Society of Construction Law Delay and Disruption Protocol, 2nd Edition