Duty to mitigate loss

In Win Profit Corp Ltd v World Orient Investment Limited ([2012] 2 HKLRD 1053) P entered into a contract to sell D a large area of prime office space in Tsim Sha Tsui. D then backed out of the transaction. P forfeited the deposit and several months later it resold the property for a considerably lower sum than D had agreed to pay, the Lehman Brothers crisis having intervened. P sought to recover the difference between the price offered by D and the price eventually received but giving credit for the deposit. The contract with D seemed to entitle it to do this. P failed however. The contractual term preserving P’s right to recover any loss beyond the deposit was subject to P’s duty to mitigate its loss; it had to resell the property with due diligence and to make reasonable efforts to mitigate its loss. Immediately after the transaction with D fell through it had a number of offers and there was great interest in the property as it was rare and potential buyers perceived the opportunity to get it at a reduced price. Some firm offers were made, P discarded other offers and took few active steps to market the property. The court found that had P acted reasonably it would have achieved a price equal to 90% of the price offered by D. Thus, having forfeited the deposit P had suffered no further loss that could be recovered from D. The further loss was the result of its own delay. This was not a case of a seller seriously trying to sell but faced with the difficulty of a falling market.

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