Contract Doctrine, Theory & Practice Volume 3, 2012a

instances the appropriate course may be to complete
performance instead of stopping. Finally the
aggrieved party is not expected to put himself in a
position that will involve humiliation, including
embarrassment or loss of honor and respect.
h. Actual efforts to mitigate damages. Sometimes the
injured party makes efforts to avoid loss but fails to
do so. The rule stated in Subsection (2) protects the
injured party in that situation if the efforts were
reasonable. If, for example, a seller who is to
manufacture goods for a buyer decides, on
repudiation by the buyer, “in the exercise of
reasonable commercial judgment for the purpose of
avoiding loss” to complete manufacture of the goods,
he is protected under Uniform Commercial Code § 2-
704(2) even if it later appears that he could have
better avoided loss by stopping manufacture.
Similarly, if a buyer of goods who decides, on
repudiation by the seller, to “‘cover' by making in
good faith and without unreasonable delay any
reasonable purchase of or contract to purchase goods
in substitution for those due from the seller,” he is
protected under Uniform Commercial Code § 2-712.
See also Uniform Commercial Code § 2-706 for the
seller's comparable right of resale. The rule stated in
Subsection (2) reflects the policy underlying these
Code provisions, one encouraging the injured party to
make reasonable efforts to avoid loss by protecting
him even when his efforts fail. To this extent, his
failure to avoid loss does not have the effect stated in
Subsection (1). Under the rule stated in § 347, costs
incurred in a reasonable but unsuccessful effort to
avoid loss are recoverable as incidental losses. See
Comment c to § 347.
The first of the mitigation cases below shows what can happen
when the promisor’s repudiation of the contract is ambiguous. In
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