Under the Commercial Law 2005, when a non-defaulting party makes a claim for damage due to a breach of contract, the non-defaulting party has the obligations to mitigate the damages it has suffered (Duty To Mitigate). However, Commercial Law 2005 is silent on whether the responsibility to prove the non-defaulting party’s fulfillment or (non-fulfillment) of Duty To Mitigate belongs to the defaulting party or the non-defaulting party. That said, it is likely that the defaulting party will have the obligation to prove that the non-defaulting party fails to mitigate the damages it has suffered.  

One could argue that the non-defaulting party has the burden of proof of its fulfillment with the Duty To Mitigate because Article 304 of Commercial Law 2005 provides that the party claiming for damage must prove the “the loss, the extent of the loss” caused by the breach of the defaulting party. Arguably, “the extent of loss” must be proved by the non-defaulting party should exclude the amount of loss which could have been mitigated if the non-defaulting has fulfilled its Duty To Mitigate (i.e. all reasonable measures have been taken to mitigate the loss). In other words, to prove or request the defaulting party to compensate for a specific amount of damage, the non-defaulting party must take into account the fulfillment of its Duty To Mitigate and is responsible for proving that it has complied with its Duty To Mitigate.

On the other hand, the non-defaulting party could argue that the defaulting party must bear the burden of proof of the non-defaulting party’s failure to comply with the Duty To Mitigate. This is because requesting a reduction in the amount of compensation is the “right” of the defaulting party. Therefore, to exercise its right, it must prove that the non-defaulting has failed to comply with its Duty To Mitigate. This line of reasoning is analogy to the interpretation regarding burden of proof of damage by the non-defaulting party. In particular, as claiming for damage is the “right” of the non-defaulting party, it must bear the burden of proof of damage.

Dr. Do Van Dai also takes the second view under his book “Remedies for failure to properly implement contracts” (page 226). In particular, Dr. Do Van Dai comments that the defaulting party is obliged to (i) prove that the loss should have been mitigated by the non-defaulting party, and (ii) clarify the specific amount which should have been mitigated. It is worth noting that under English Law, the burden of proof is also on the party in breach to demonstrate a failure to mitigate by the non-defaulting party.

In our opinion, it is reasonable to require the defaulting party to be responsible for proving the non-defaulting party’s failure to comply with the Duty To Mitigate before requesting a specific amount of damage to be excluded.

This post is written by Trinh Phuong Thao and edited by Nguyen Quang Vu.