A contractor was hired to build a warehouse for a business. Partway through the project, the business wrongfully terminated the contract, despite the contractor having already purchased materials specifically for the warehouse. Under contract law, what is the contractor required to do regarding the materials?
Resell or repurpose the materials, if feasible, to reduce financial losses.
Send a demand letter requiring the business to repurchase the materials at their original cost.
Dispose of the materials since the contract was terminated.
Retain the materials and sue the business for the full purchase price.
The correct answer is based on the principle that a wronged party in a contract dispute has a duty to mitigate damages. This duty means the contractor must take reasonable steps to minimize their financial loss, which includes reselling or repurposing materials if possible. Failure to mitigate damages may limit the amount of recovery in court. Options to discard the materials or demand the business cover the full cost without attempting to resell or repurpose are not reasonable under this rule.
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