When a business or professional provides services in Australia, an enforceable obligation arises to exercise due care and skill. This duty flows from multiple legal sources – contract law, tort law, and the Australian Consumer Law (ACL). Breaching it can trigger damages claims, civil penalties, and reputational harm.
This article, by our contract law team, breaks down the legal framework, highlights recent cases, and offers practical steps to help organisations and advisers minimise risk while delivering high-quality services.
Key Takeaways
- Every service provider in Australia owes a duty of due care and skill
- Section 60 of the ACL implies a statutory guarantee of due care and skill into most consumer and small-business service contracts
- Common-law negligence and contractual implied terms operate in parallel with the ACL
- Courts assess “care and skill” objectively by reference to a reasonable professional in the same circumstances
- Breach can give rise to damages, injunctions, pecuniary penalties and, for regulated professionals, disciplinary action
- Clear service scopes, robust quality-assurance processes and up-to-date professional training are the most effective compliance strategies
What Does “Due Care and Skill” Mean?
The phrase captures two distinct but overlapping concepts:
- Care – avoiding foreseeable risk of damage or loss
- Skill – applying recognised professional or trade expertise at an appropriate standard
Courts apply an objective standard. The key question is: Would a reasonable person with the same qualifications and resources have acted differently under the same circumstances?
Learn more about the reasonable person test in our article.
The ACL and the Statutory Guarantee
Section 60 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL) provides:
“If a person supplies services to a consumer, there is a guarantee that the services will be rendered with due care and skill.”
This guarantee applies not only to individuals but also to businesses acquiring services valued at up to $100,000 (see s 3(1) ACL). The guarantee cannot be excluded, except in very limited business-to-business arrangements under section 64A.
Remedies for breach may include:
A refund or repeat service
Compensation for loss or damage
Civil penalties enforced by the ACCC
Can Contract Terms Override the Statutory Guarantee?
No. Any attempt to exclude or restrict the section 60 guarantee is void. However, parties can still manage risk through:
Narrowly defining the scope of services
Allocating liability via indemnity clauses (subject to the unfair contract terms regime under ss 23–28 ACL)
Overlapping Legal Duties: Contract and Tort
Statutory guarantees do not displace existing common-law rights. Courts have confirmed in Astley v Austrust Ltd (1999) 197 CLR 1 that parties may pursue contractual or tortious remedies in parallel.
Here’s how the main legal frameworks compare:
Legal Source | Key ‘Duty’ Element | Remedy | Limitation Period |
Tort (Negligence ) | Duty of care, breach, damage, causation | Damages | 6 yrs (most States) |
Contract | Express or implied term to exercise due care and skill | Damages, termination | 6 yrs (12 in some jurisdictions if deed) |
Equity / Fiduciary duty (professionals) | Loyalty and no conflict | Account of profits, compensation | Variable |
Additional Obligations for Regulated Professionals
Professionals in law, medicine, engineering and other licensed fields are also subject to professional conduct rules, such as:
Legal Profession Uniform Law s 297
Breaches can lead to disciplinary action, suspension, or loss of licence.
How Courts Assess Whether a Breach Occurred
Courts evaluate conduct based on the specific circumstances of the case. Key factors include:
- Accepted industry or professional standards at the time
- The complexity and novelty of the work
- The client’s instructions, disclosures, and expectations
- Resources reasonably available to the service provider
- Any relevant legislation or codes of conduct
Notable Cases
Samaan v Kentucky Fried Chicken Pty Ltd – The Court awarded $8 million in damages after a child suffered serious injury due to unsafe cooking procedures. It’s a stark reminder of the duty to implement safe systems.
Australian Knitting Mills Ltd v Grant – A foundational case in Australian consumer law that established key principles of implied conditions in supply contracts.
Practical Steps for Service Providers to Demonstrate Due Care and Skill
Complying with the duty of due care and skill is not just about legal risk – it also supports better client outcomes and builds trust. Here’s how to reduce exposure:
Develop clear and detailed scopes of work
Maintain documented processes and quality controls
Ensure your team is properly trained and accredited
Conduct risk assessments regularly and act on findings
Take out appropriate professional indemnity insurance
Use structured client complaint-handling procedures (e.g. AS/NZS 10002:2014)
Conduct peer reviews for complex or high-risk matters
Consequences of Breaching the Duty
Failing to exercise due care and skill may lead to:
Claims for compensatory or consequential damages
Termination or rescission of the contract
Civil penalties of up to $50 million for corporations (under s 224 ACL)
Regulatory sanctions, reputational harm and loss of licence
Personal liability for directors or executives under s 75B of the Competition and Consumer Act
Case Study: IT Services Gone Wrong
A Brisbane-based IT consultancy promised to deliver a bespoke payroll system within six months. Due to inadequate staffing and testing, the system launched with critical defects, causing the client $750,000 in additional wages and penalties.
The Federal Court found both a breach of s 60 of the ACL and the implied contractual term of due care and skill. The consultancy:
- Paid $1.2 million in damages (including foreseeable consequential loss)
- Agreed to implement a compliance program monitored by the ACCC
- Suffered significant brand damage, losing two major clients within 12 months
Learn more about consultancy contracts for Engineers and Architects in our article.
Due Care and Skill Compliance Checklist
- Confirm currency of professional qualifications
- Use written engagement letters with clear deliverables
- Align processes with ISO 9001 quality standards
- Keep contemporaneous file notes and client communications
- Schedule annual insurance reviews
- Undertake continuous professional development (CPD) beyond minimum requirements
Need advice on mitigating your organisation’s service-delivery risks or responding to an ACL claim? Contact our team to book a free initial consultation.
Frequently Asked Questions
Does the ACL guarantee apply to business-to-business contracts?
Yes, if the contract price for services is $100,000 or less, or if the services are of a kind ordinarily acquired for personal, domestic or household use
Can we cap our liability for breach of due care and skill?
Only in limited situations; any term that seeks to exclude or limit the statutory guarantee may be void under s 64 ACL, and unfair contract term provisions may also apply
How does professional negligence differ from an ACL breach?
Professional negligence requires proof of duty, breach, causation and damage, whereas an ACL breach focuses on whether services were rendered with due care and skill; evidentiary burdens and remedies differ
What evidence helps defend a due care and skill claim?
Detailed scoping documents, signed client approvals, contemporaneous file notes, peer-review records and expert opinions demonstrating alignment with accepted practice
Are penalties insurable?
Civil penalties under the ACL are generally not insurable under Australian public policy, but defence costs and compensatory damages are usually covered by professional indemnity policies
Does “best endeavours” raise the standard above “due care and skill”?
Typically yes; clauses requiring “best” or “all reasonable” endeavours impose a higher contractual standard than the baseline statutory guarantee
