Specific Relief Act (SRA)
Substituted Performance versus Mitigation of Damages
Both substituted performance and mitigation involve the injured party doing something after a breach, so they are easily run together, but they are quite different in nature. Substituted performance under Section 20 is a statutory right: after due notice, the aggrieved party may have the contract performed elsewhere and recover the cost from the defaulter. Mitigation is a common-law duty: the injured party must take reasonable steps to reduce his loss, and damages are cut down by loss he could have avoided. This note explains each in its own right, compares them, and works through an example.
Figure: Substituted performance and mitigation compared, a right to act against a duty to act
1. Substituted Performance in Its Own Right
Substituted performance, under Section 20, is a right given to the aggrieved party to secure the performance he bargained for. Where the contract is broken, he may, after a written notice of not less than thirty days, have the contract performed by a third party or by his own agency, and recover the expenses and costs actually incurred from the defaulter. It is his own interest that the section serves, getting the thing done. There is a price: once he obtains substituted performance, he cannot also claim specific performance of the same contract (Sections 14(a) and 16(a)), though he keeps his right to compensation for further loss.
2. Mitigation of Damages in Its Own Right
Mitigation is a duty the law imposes on the injured party, to keep the recoverable loss down. After a breach he must take reasonable steps to reduce his loss; he cannot sit back and let the loss mount and then charge it all to the defaulter. It requires no notice and creates no claim of its own: it simply caps the damages, so that he recovers only the loss he could not reasonably have avoided. It belongs to the general law of damages, under Section 73 of the Contract Act, and serves the law's interest in confining recoverable loss.
3. The Two Compared
Basis | Substituted performance (Section 20) | Mitigation of damages |
|---|---|---|
What it is | A right to have the contract performed elsewhere | A duty to take reasonable steps to reduce the loss |
Whose interest | The aggrieved party's, to secure performance | The law's, to keep the recoverable loss down |
Trigger | Breach, then a written notice of not less than thirty days | Breach, at once; no notice required |
What follows | The work is done by a third party or own agency | The injured party acts to limit his loss |
Recovery | The expenses and costs actually incurred, from the defaulter | Only the loss that could not reasonably be avoided |
Effect on remedies | Obtaining it bars specific performance (Sections 14(a), 16(a)) | It caps damages; it is not itself a claim |
4. A Right to Act against a Duty to Act
The essential difference ▪ Substituted performance is a right. After a thirty-day notice, the aggrieved party has the contract performed elsewhere and recovers the cost from the defaulter, though he then loses the right to specific performance. ▪ Mitigation is a duty. The injured party must take reasonable steps to reduce his loss, and damages are cut down by loss he could have avoided. ▪ In short. One lets him recover an outlay; the other limits his claim. |
5. A Worked Example
Suppose a supplier fails to deliver machinery a factory needs. Under substituted performance, the factory may, after a thirty-day written notice, buy the machinery from another supplier and recover the extra cost from the defaulting supplier under Section 20; it has exercised a right to secure the performance, though it can no longer sue that supplier for specific performance. Mitigation works differently and always: whatever remedy the factory pursues, it must act reasonably to keep its loss down, for example by sourcing the machinery promptly rather than letting production halt for months. If it lets the loss mount needlessly, the extra loss is not recoverable. So substituted performance is a positive right the factory may choose to use; mitigation is a duty that limits what it can recover in any event.
6. Frequently Asked Questions
Q. What is the difference between substituted performance and mitigation?
A. Substituted performance is a statutory right under Section 20 to have the contract performed elsewhere and recover the cost; mitigation is a common-law duty to reduce one's loss, which caps recoverable damages.
Q. Does substituted performance need notice?
A. Yes. It requires a written notice of not less than thirty days calling on the defaulter to perform; mitigation requires no notice and arises at once on breach.
Q. Does mitigation create a claim?
A. No. It is not itself a claim; it simply limits recoverable damages to the loss that could not reasonably have been avoided.
Q. Can a party use both?
A. In a sense: mitigation always limits recoverable loss, while substituted performance is a right the aggrieved party may choose to exercise, at the cost of losing specific performance of the same contract.
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