[Direct answer]In the Beijing area, if the party in breach of contract fails to take active measures to prevent the expansion of losses, the party may not be able to obtain compensation for the expanded portion of the losses. According to Article 591 of the Civil Code of the People's Republic of China (effective January 1, 2021), after the party in breach of contract violates the contract, the other party shall take appropriate measures to prevent the expansion of losses; if the other party fails to take appropriate measures and causes the expansion of losses, it shall not request compensation for the expanded losses; and the reasonable expenses incurred by the other party in preventing the expansion of losses shall be borne by the party in breach of contract. In other words, after the other party breaches the contract, the party in compliance with the contract has the obligation to mitigate losses: it shall take reasonable measures in a timely manner, such as purchasing the subject matter elsewhere, reselling the subject matter, properly storing the goods, or taking timely measures to prevent further losses. For losses that are expanded due to passive waiting or neglect, the court generally will not support them, and the party in compliance with the contract shall bear the responsibility for these losses. It should be noted that the requirement of the obligation to mitigate losses is to take appropriate and reasonable measures, not to demand perfection; as long as the party in compliance with the contract has fulfilled its obligation of reasonable care, losses that still occur due to objective reasons can still be claimed from the party in breach of contract, and the reasonable expenses incurred for this purpose can also be claimed from the party in breach of contract. Therefore, when encountering a breach of contract, the party in compliance with the contract should take decisive measures to stop the losses and preserve the evidence of the mitigation measures and expenses.

I. Problem Background and Typical Scenarios

After the other party breaches the contract, whether the party in compliance must take mitigation measures directly affects the scope of compensation. There are three typical scenarios: first, the buyer refuses to accept the goods, and the seller fails to resell them in time, resulting in an expansion of losses; second, the supplier breaches the contract, and the purchaser fails to procure from other sources in time, causing an expansion of losses due to a work stoppage; third, the leased property is damaged, and the lessee fails to repair it in time, resulting in an increase in losses. When the Beijing area court hears such cases, it will review whether the party in compliance has fulfilled its obligation of mitigation and will not support the expanded part of the losses. Understanding the rules of the obligation of mitigation can help the party in compliance stop the losses in time and avoid having its compensation requests reduced.

II. Key points of contention

First, the legal basis and content of the obligation to mitigate losses. Second, what constitutes appropriate and reasonable mitigation measures. Third, how to define and provide evidence of increased losses. Fourth, who should bear the costs of mitigation. Fifth, the interface between the obligation to mitigate losses and the other party's liability for breach of contract. The core is to review the obligation to mitigate losses within the framework of the mitigation rules for loss compensation, clarifying that the increased portion will not be compensated, and that the reasonable costs of mitigation should be borne by the party in breach of contract.

III. Professional analysis by Henglue Law Firm

From a practical perspective, the mitigation rule is an important system that limits the scope of compensation and encourages the breaching party to take active measures to mitigate losses. The Civil Code stipulates that after a breach of contract occurs, the non-breaching party shall take appropriate measures to prevent the expansion of losses; if the non-breaching party fails to take appropriate measures and causes the expansion of losses, it shall not request compensation for the expanded losses. To determine whether the non-breaching party has fulfilled its obligation of mitigation, it is usually necessary to consider whether the measures taken are timely and reasonable, and whether they conform to the customs and common sense of transactions, rather than demanding them with idealized standards in hindsight. For example, when the buyer refuses to accept perishable goods, it is reasonable for the seller to reduce the price and resell them in a timely manner. If the seller leaves the goods unattended for a long time and causes their damage, the expanded part will not be supported. To determine whether the losses are due to the non-fulfillment of the obligation of mitigation, it is necessary to consider the time node, market conditions, and causality. The party claiming non-compensation shall usually provide evidence of the amount and causes of the expanded losses. In addition, the law stipulates that the reasonable expenses incurred by the non-breaching party to prevent the expansion of losses shall be borne by the breaching party, which reflects the encouragement of active mitigation actions. Therefore, after the breaching party breaches the contract, the non-breaching party shall take reasonable measures to mitigate losses as soon as possible and document the mitigation process and expenses through written notifications, resale records, and alternative transaction certificates; the breaching party may raise defenses against the expanded losses caused by the non-fulfillment of the obligation of mitigation and claim corresponding reductions. Clarifying the obligation of mitigation and the rules of cost sharing will help both parties rationally handle the allocation of losses after a breach of contract.

IV. Practical suggestions and legal basis

Action suggestions: Firstly, take reasonable measures to mitigate losses promptly after the other party breaches the contract; Secondly, keep records of the process of mitigation measures and expenditure vouchers; Thirdly, fix the facts of breach of contract and mitigation of losses through written notifications and other means; Fourthly, list and explain the basis for the expanded losses and mitigation costs separately; Fifthly, pay attention to the rationality and timeliness of mitigation measures. For corporate commercial and contract disputes, you can refer to the following guidelines:Business and contract disputes in enterprisesFor issues related to evidence and procedures, you can refer to the following materials for reference:Comprehensive legal servicesLegal basis: Article 591 of the Civil Code of the People's Republic of China (effective as of January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, the party in breach of contract has the obligation to mitigate the losses. Secondly, the expanded losses caused by the failure to mitigate the losses shall not be compensated. Thirdly, the reasonable mitigation costs shall be borne by the party in breach of contract. Fourthly, it is crucial to stop the losses in time and preserve the evidence. For contract disputes, you can seek legal assistance through the following channels:Business and contract disputes in enterprisesThe acquisition of services involves the integration of evidence and proceduresIntegrated legal servicesFor matters related to the enforcement of compensation, you can refer to the following document for reference.Creditor's rights and debts, and enforcement casesColumn.

VI. Frequently Asked Questions

Q1: Will the breaching party receive less compensation if the contract-abiding party does not actively mitigate the losses?

Yes. If the other party fails to take appropriate measures after breaching the contract, resulting in an increase in losses, the party concerned shall not request compensation for the increased part of the losses, and the party concerned may bear the losses of this part by itself.

Q2: What is the duty of mitigation?

After the breach of contract occurs, the party in compliance with the contract shall take appropriate measures to prevent the loss from expanding, such as reselling the goods in time, purchasing elsewhere, or properly keeping the subject matter.

Q3: Who will bear the impairment expenses?

The reasonable expenses incurred by the party in breach of contract to prevent the loss from being aggravated shall be borne by the party in breach of contract, provided that the measures taken are reasonable and the expenses are related to preventing the loss from being aggravated.

Q4: How does the court determine whether the party has fulfilled its obligation to mitigate losses?

Generally, we should evaluate whether the measures are timely and reasonable, and whether they conform to transactional practices and common sense, rather than imposing strict requirements on the party who fulfills the contract based on idealized standards in hindsight.

Q5: How to provide evidence of the increased losses?

It should be explained in combination with time nodes, market conditions, and causal relationships. The party claiming no compensation usually needs to provide evidence of the amount and causes of the increased losses.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Lawyers about specific situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Corporate commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.