Any adviser · What you are owed
What am I owed if a consultant’s work falls short?
If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. There is a guarantee that the services, and any product resulting from the services, will be reasonably fit for a particular purpose the consumer makes known to the supplier. And where the time for supply is not fixed by the contract and not to be determined in a manner agreed to by the consumer and supplier, there is a guarantee that the services will be supplied within a reasonable time.
The guarantees arrive automatically. The ACCC says businesses should be aware that all goods and services purchased automatically have consumer guarantees attached to them under the ACL, and that consumer guarantees replace the implied conditions and warranties which previously existed in national, state and territory laws. This guide answers whether an engagement is a consumer service, what a buyer can ask for when the work falls short, and who owns the report. It reports what the Act and the regulators say; it does not decide your own claim.
Any adviser
Licensed, registered, or a director
- 1 TaxApplies tax law to your own circumstances, and you rely on it, for a feeTax agent or BAS agent, registered with the Tax Practitioners Board
- 2 Financial productsRecommends which financial product to buy: shares, super and insurance among themAFS licensee, or an authorised representative of one
- 3 CreditSuggests or assists with a specific contract from a specific credit providerCredit licensee, or a credit representative of one
- 4 Legal workAdvises on, or drafts, the terms of a contractAustralian legal practitioner, holding a current practising certificate
- 5 The companyThe directors are accustomed to act in accordance with the adviser’s instructions or wishesA director in law, with no appointment needed
General information about how Australian law treats business advice. It is not tax, financial or legal advice. Check an adviser on the official register, where a line names one.
Is the service a consumer service?
The whole test, as the Act states it: a person is taken to have acquired particular services as a consumer if, and only if, the amount paid or payable for the services did not exceed $100,000, the amount prescribed for the Act, or the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.
An ACCC guide notes the threshold moved: “This guide is intended to reflect consumer law at a point in time and does not reflect changes to the Australian Consumer Law which have occurred since initial publication. These changes include: changes to the definition of ‘consumer’. For goods and services supplied from 1 July 2021, the threshold amount has increased from $40,000 to $100,000.”
| Is it a consumer service? | What a failure gets you | |
|---|---|---|
| An engagement below the threshold | Yes, on the price limb: under the Australian Consumer Law, a person is taken to have acquired particular services as a consumer if, and only if, the amount paid or payable for the services did not exceed $100,000, the amount prescribed. | If any of these guarantees are not complied with, the consumer may take action to obtain a remedy from the supplier or, in some cases, the manufacturer or importer; the remedies are generally a repair, replacement, refund or having an unsatisfactory service performed again. |
| An engagement above the threshold | The price alone does not settle it. Under the same Act, a person is taken to have acquired particular services as a consumer if, and only if, the amount paid or payable did not exceed $100,000 or the services were of a kind ordinarily acquired for personal, domestic or household use or consumption. The ACCC puts the second limb as a plain fact about who is covered: products and services that are normally bought for personal or household use are covered by consumer guarantees. | Where neither limb is met, the Act does not treat the buyer as a consumer, and the guarantee at the centre of this guide is written for a consumer: if a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. |
| A service of a kind bought for personal use | The second limb of the test, in the Act’s own words: the services were of a kind ordinarily acquired for personal, domestic or household use or consumption. | One fact helps when it has to be argued: if it is alleged in any proceeding under the Australian Consumer Law, or in any other proceeding in respect of a matter arising under it, that a person was a consumer in relation to particular goods or services, it is presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services. |
The three service guarantees
Due care and skill, in the Act’s words: if a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. The ACCC’s reading of the standard: service providers must carry out all services using an acceptable level of care and skill, and their work must be at least as good as what a competent service provider with average skills and experience would provide.
Fitness for purpose: if the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer, there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose. The section carries its own limit: it does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier.
A reasonable time: if the time within which the services are to be supplied is not fixed by the contract for the supply of the services, or is not to be determined in a manner agreed to by the consumer and supplier, there is a guarantee that the services will be supplied within a reasonable time. The ACCC puts the short form of the same rule: services must be supplied within a reasonable time, if there’s no agreed time frame.
Minor failures and major failures
A service has a major problem when it: creates an unsafe situation, has either one serious problem or several smaller problems that would stop someone buying the service if they knew about them beforehand, or can’t be used for its normal purpose, or for a specific purpose that the consumer told the seller about, or doesn’t achieve a specific result that the consumer told the seller about, and can’t easily be fixed within a reasonable time.
The remedy depends on which kind of problem it is: the type of remedy a consumer is entitled to depends on the nature of the problem (also known as a failure) and whether the problem is major or minor. A minor problem can be fixed within a reasonable time, and consumers must give the supplier the chance to fix the problem.
When a service has a major problem, a consumer can choose to: cancel the contract and get a refund (this may not be a full refund, as the consumer needs to pay a reasonable amount for any work done so far and as expected), or keep the contract, but pay a lower price that takes the problem into account.
None of it can be signed away. Consumer guarantees cannot be excluded by contract, consumer guarantees for goods or services cannot be altered or waived by sellers or consumers, and any term in a contract which tries to limit or exclude consumers’ rights under the consumer guarantees will be void. When you buy a product or service, certain consumer rights always exist under the law, and the terms and conditions of a contract can’t take away these rights.
Who owns the report
The starting position is the contractor’s, not the hirer’s: under IP laws, the contractor automatically owns any IP they create, and if the hirer wants to own the IP, the contract must state this. IP Australia states the same rule for its field: in Australia, IP created by a contractor is the property of the contractor unless otherwise stated in the contract.
The clause that changes it is worth attention: intellectual property (IP) ownership clauses in contracts are critical for working out who holds the rights to any IP created during a business relationship, and the owner of the IP rights can license or sell the creation and stop other people from making money out of it.
The report is also where fitness for purpose bites hardest. The guarantee covers the services and any product resulting from them, and the ACCC’s major-problem test for a service asks whether it doesn’t achieve a specific result that the consumer told the seller about.
How to raise it
The order the sources suggest starts with the other business. When you have a problem with another business, you need to contact them and try to resolve the issue directly; if the business doesn’t fix the problem, there are other steps you can take. Put it in writing: it’s a good idea to put your issue and discussion in writing as a letter or email, and if discussion doesn’t work, write to the other business before you take the issue further.
If the contract is with a contractor, there is a step built for this: hirers should give contractors a notice to remedy work, which gives the contractor a chance to fix the work before the hirer seeks any remedies for a breach of contract.
Outside the courts, and usually quicker: these processes involve an independent third-party stepping in to help you and the other business resolve your dispute without going to court, and they are usually quicker and cheaper than taking legal action. You can contact your local small business commissioner for help to find an accredited mediator, and the Australian Small Business and Family Enterprise Ombudsman, named on Business Tasmania’s page, offers information about dispute resolution options and can help a business reach mediation and other alternative dispute resolution services, which it describes as generally quicker and less costly than formal court action.
Court is the last resort, on the ACCC’s own advice: taking a dispute to court can be expensive, stressful and time consuming, and it should only be considered if all other options have failed.