1. Evaluate the Heymanns’ decision to rely on the “major defects” clause to attempt to void their contract to purchase the condominium.

2. State the two rules of law applied by the court in the case regarding mitigation of damages.

3. Summarize the outcome of this case.

On February 4, 2006, the Heymanns agreed to buy a condominium from Gayle Fischer for $315,000. Both parties signed a purchase and sale agreement. The Agreement authorized the Heymanns to terminate if Fischer refused to fix any “major defect” discovered upon inspection, but did not permit them to terminate if Fischer refused to perform “routine maintenance” or make “minor repair[s].” On February 10, 2006, the Heymanns demanded Fischer fix an electrical problem after an inspection report revealed electricity was not flowing to three power outlets. The Heymanns thought this was a “major defect” under the Agreement and conditioned their purchase on Fischer’s timely response. Fischer failed to timely respond to their demand—even though she eventually fixed the problem for $117 on February 20, by having an electrician push the reset button on three outlets and change a light bulb. The Heymanns tendered a mutual release to void the Agreement. Fischer refused to sign the release and sued for specific performances or damages. The case progressed to the trial court, the court of appeals, back to the trial court, and ultimately to the Supreme Court of Indiana.

After the deal fell through in 2006 Fischer attempted to mitigate damages by selling the condo but the housing market entered a major downturn. On February 13, 2007, she received an offer to purchase the condo for $240,000 but her counter-offer of $286,000 was rejected. She eventually sold the condo in November 2011 for $180,000. Fischer seeks damages for the difference between the Heymann purchase price of $315,000 and the sale in 2011 of $180,000 plus the cost of maintaining the condo from 2006 through 2011, and attorney’s fees for a total of $306,616.

JUDICIAL OPINION RUSH, J.… “[T]he duty to mitigate damages is a common law duty independent of the contract terms” that requires “a non-breaching party [to] make a reasonable effort to act in such a manner as to decrease the damages caused by the breach.” Still, “the burden of proving that the nonbreaching party has failed to use reasonable diligence to mitigate damages” lies with the party in breach—here, the Heymanns.

I.

… [T]he trial court referenced Fischer I : “However, as determined by the Court of Appeals, [the Heymanns] … breached the Purchase Agreement” because their request to void the contract was not based on “an objectively reasonable belief” concerning the magnitude of the electrical ………….