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Leasecomm Corp. v. Froland

A-6008-04T3 (N.J. Super. App. Div. 2006) (Unpublished)

EQUIPMENT LEASES—An equipment lessor has a duty to mitigate damages following a breach of the lease by the lessee.

A business owner entered into a lease-purchase agreement with a vendor for the lease of a vending machine. When her business sputtered, she notified the vendor that she was unable to continue her business and tried to negotiate a settlement with the vendor. The vendor refused all of her offers to settle. When the lease expired, the vendor took the position that the lease converted to a month-to-month rental agreement. The owner continued to make partial payments and seek a way to minimize her damages. The vendor did not entertain the owner’s requests and did not offer to take back the equipment. Instead, the vendor continued to require payments to increase the amount owed and then sued the business owner. The lower court found in the vendors’ favor and the owner appealed. The Appellate Division reversed and vacated the decision. It found that the lower court failed to address the vendor’s duty to mitigate damages. The Court noted that injured parties have a duty to take reasonable steps to mitigate their damages, and that damages are not recoverable if the injured party could have avoided those losses by using reasonable efforts. The duty to mitigate begins when the vendor had a reason to know that the owner was not going to be able to pay. In this case, the owner continually tried to negotiate a settlement with the vendor, but the vendor did not mitigate its damages. The vendor could have arranged to have the vending machines returned in order to mitigate its damages. Instead, it did not do so in order to increase its claimed damages. The Court noted that despite the owner’s good faith efforts to resolve the issue, the vendor ignored her suggestions and allowed the debt to continue to accrue. Therefore, the owner failed to mitigate damages. In addition, the Court found that the owner’s complaint was barred by the doctrine of laches. It found that the owner waited six years to file a complaint even though it knew years earlier that the owner could not comply with the contract. Therefore, it found the owner’s delay in filing a lawsuit unreasonable and barred by the doctrine of laches.

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