If you are a business offering a service, you are required to ensure those services are provided correctly. The Australian Consumer Law (ACL) sets out guarantees that you owe to consumers. These guarantees cannot be excluded from contracts with your customers except for in very limited circumstances. Further, if you fail to meet these standards, the ACL ensures that you are liable to make up your failures to the consumer in a number of ways. It is crucial that you are aware of your obligations under the ACL so that you can avoid potential claims and disputes. In this article, we will outline what consumer guarantees are, the exceptions which exist and strategies you can adopt to minimise liability.

Consumer Guarantees

The ACL states that, as a service provider, you are bound by various guarantees when a customer engages their services. Further, if you make any express warranties, you must fulfil these promises. As such, you should ensure that your services are:

Provided with acceptable care and skill You must use an acceptable level of skill or technical knowledge when providing your services. Additionally, you should take all necessary care to avoid loss or damage.
Fit for purpose You must achieve the consumer’s stated purpose. For example, the lights should turn on if you are engaged to install somebody’s lights. 
At a standard expected to achieve these desired results If you are painting a house, the paint should not be patchy or spilt on the carpet.
Delivered within a reasonable time (if date is finalised) For example, you would not expect the painter to complete the job six months after you engaged them.

What Happens if I Fail to Meet the  Guarantees?

In the event your services fail to meet the consumer guarantee standards, your customers can claim a remedy. This applies in cases where there are major or minor failures in your service.

Major Failures

A major failure of service occurs when:

  • a reasonable consumer would not have engaged your services had they known the particular problem existed. For example, they probably would not have hired you if they knew your car hire service would turn up an hour late;
  • the services fail to meet the reasonable expectations for that type of service and the situation cannot be resolved. For example, the consumer misses their essential meeting because the hire car is late;
  • the consumer informed you they had a particular purpose for engaging you, yet you cannot fulfil their request in time. For example, the consumer commissions a wedding dress for a wedding in six months’ time. By not finishing the dress in time, you have committed a major failure of service; or
  • the supply of services has resulted in an unsafe situation. For example, your service has placed the consumer at risk of physical harm.

Minor Failures

Anything not listed above is a minor failure. If there is a minor failure, unlike a major failure, you can choose how to remedy the failure. However, if the failure is due to events outside your control, then the consumer will not be entitled to a remedy.

For example, the delay of outdoor activities because of bad weather is not a consumer guarantee breach.

A failure to provide services with due care and skill could also lead to ‘reasonably foreseeable’ personal injury or property damages. In these situations, the consumer may be able to claim compensation against you.

Exclusion Clauses and Disclaimers

While contracts under the ACL generally cannot exclude the consumer guarantees, there is an exception. You can limit or exclude your liability for accidental death or physical injury (but not property damage) which occur because of recreational activities that involve significant physical exertion or risk. An example of an activity with high risk would be attending a horse riding school. This applies if the consumers are undertaking that activity for recreation, enjoyment or leisure.

The exclusion does not apply if your reckless conduct causes the injury. This occurs when you:

  1. are informed, or were reasonably aware, of a significant risk that your conduct could result in personal injury to another person; and
  2. engage in the conduct despite the risk and without adequate justification.  

An example of this could occur when offering an abseiling service. You would be reckless in not correctly fitting safety equipment on the consumer, such as not making them wear a helmet despite knowing this is best practice.

Remedies

You can be liable for your failure to comply with consumer guarantees which deal specifically with services. If the failure to provide services with due care and skill leads to foreseeable personal injury or property damage, then you may be sued for compensation. This figure could be lowered if the consumer contributed to their own injury.

You may also be liable for consequential losses. These are indirect losses that:

  • were reasonably foreseeable to the parties at the time they entered into the contract; and
  • were the likely outcome of your failure to meet the consumer guarantees.

To use the abseiling example above, a consumer may hurt themselves because you failed to implement safety measures properly. In this case, you may be liable for their associated costs, such as long-term care needs and ongoing medical expenses.

Key Takeaways

If you are a service provider, you must ensure that you comply with your consumer guarantees as they offer consumers broad protections and remedies. In most circumstances, you cannot contract out of these guarantees. It is important you render your services properly, as well as for the purposes and result the consumer intends. If you fail to meet the guarantees, you will owe a consumer:

  • a refund;
  • compensation, including, for example, payment of ongoing care or medical costs; or
  • if possible, ‘rectification’ (where you return the consumer to the position they were in before the injury).

If you are a recreational services provider, include an exclusion clause in your contracts where you limit your liability for physical harm. However, you will still be liable for all other damage that results from your failures. If you need assistance drafting or reviewing your consumer guarantees, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Charlotte Hale
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