Spencer signs a contract promising to review comedy films for a year in exchange for $60,000. Spencer works for a month and receives $5,000. His employer then breaches the contract by refusing to pay Spencer for any more work.
Spencer makes reasonable efforts to look for a new job. After two months of no work, Spencer receives an offer to clean shower stalls for $40,000 per year. Spencer rejects the offer. With two months left in the original contract period, Spencer receives an offer to review thriller films for year in exchange for $15,000 per month. Spencer again rejects the offer.
After Spencer sues for breach of contract, the court awards $25,000 in compensatory damages and not the $55,000 Spencer wanted. Why?
The amount owed Spencer under contract was $55,000. At all times, he made reasonable efforts to look for a new job. He did not have to accept the offer to clean shower stalls, because this line of work was drastically different from that which he agreed to do.
However, the court uses its discretion to decide that it would have been reasonable for Spencer to accept the job reviewing thriller films. If Spencer had reasonably acted to mitigate damages, he would have made $30,000 in the last two months of the contract term. Subtracting $30,000 from $55,000, the court awards Spencer $25,000 in compensatory damages.