Duty of care to customers and your legal obligations as a business

Every Australian business that supplies goods or services, or invites customers onto its premises, owes those customers a duty of care. That is a legal obligation to take reasonable care to avoid causing harm that a reasonable person in your position could foresee. If you breach it and a customer is hurt, your business can be ordered to pay compensation, usually funded out of pocket or through your public liability insurance.

The duty of care is one part of the law of negligence, and it sits alongside other obligations you already owe customers, such as the consumer guarantees under the Australian Consumer Law. This article explains who owes the duty, the standard the courts apply when deciding whether you have breached it, the specific duties that apply if you occupy premises or provide professional services, and what happens if a customer sues you.

Who owes the duty

There is no turnover threshold, registration requirement or minimum business size. The duty arises out of the relationship itself, the moment you deal with a customer in a way that could foreseeably cause them harm. In practice it covers:

Suppliers of goods and services: any business selling products or providing services must take reasonable care that what it supplies does not injure the customer or damage their property.
Occupiers of premises: if customers come onto premises you own, lease or control, you owe them a duty to take reasonable care for their safety while they are there.
Professionals: accountants, architects, engineers, financial advisers and similar providers are judged against the standard of their profession, not the general standard applied to other businesses.
Businesses with separate statutory obligations: the consumer guarantees in s 54 and s 60 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) require goods to be of acceptable quality and services to be rendered with due care and skill. These are strict obligations and exist regardless of whether anyone was negligent.

The key trigger is foreseeability. If a reasonable person in your position would recognise that a customer could be harmed by the way you operate, a duty of care is likely to arise. A cafe that serves hot coffee, a retailer with a shopfront and a tradie who works in customers' homes all owe duties, and each is assessed against the risks its own operations create.

The standard: what reasonable care actually requires

The test for whether you have breached the duty is set out in s 5B of the Civil Liability Act 2002 (NSW), and equivalent provisions apply in every state and territory. You are not negligent for failing to take precautions against a risk unless three things are all true:

the risk was foreseeable, meaning you knew or ought to have known about it;
the risk was not insignificant; and
a reasonable person in your position would have taken precautions against it.

In deciding whether a reasonable person would have taken precautions, the court weighs the probability that the harm would occur, the likely seriousness of the harm, the burden of taking precautions and the social utility of the activity that created the risk. The duty is not to guarantee safety. It is to act as a reasonable business in your industry, with your resources, would act.

A wet floor at the entrance of a shop is the classic example. A customer slipping is foreseeable and not insignificant. The burden of precautions is low: mop up promptly or put out a warning sign. If you do neither and a customer falls, a court is likely to find you breached the duty. By contrast, a business is not expected to take every conceivable precaution against a risk that is far-fetched or fanciful, or one that would be prohibitively expensive relative to the chance of harm.

Occupiers of premises: keeping customers safe on your floor

If customers enter premises you occupy, whether a shop, cafe, warehouse, office or car park, you owe them a duty of care as an occupier. The High Court's decision in Strong v Woolworths Ltd [2012] HCA 5 shows what this duty really requires.

Ms Strong, a customer who walked with crutches after an above-knee amputation, slipped when the tip of her crutch came into contact with a greasy chip lying on the floor of the sidewalk sales area of a Big W store operated by Woolworths. She fell heavily and was injured. The High Court restored a judgment of $580,299.12 in her favour. The critical finding was not that Woolworths should have spotted the chip at the moment she slipped. It was that Woolworths had failed to run an adequate system of periodic inspection and cleaning of that area. The area had not been inspected at all in the four and a half hours before her fall, and there was no dispute that an inspection would have found and removed the chip.

The lesson for any business with a shopfront is that the duty is systemic. You are not only required to react to hazards you actually see. You must have a reasonable system for finding and fixing them before a customer is hurt.

What a reasonable system looks like

A reasonable system for managing customer safety covers:

Scheduled inspections: set and document how often floors, aisles, entrances and outdoor areas are checked, and increase the frequency in high-traffic periods.
Clean as you go: make spill cleanup part of every staff member's job, not a task that waits for a cleaner.
Training: make sure staff know how to respond to a spill or hazard immediately, including cordoning off the area.
Records: keep a log of inspections and cleanups. If you are ever sued, the log is your evidence that a reasonable system existed.
Incident response: record every customer incident, no matter how minor, and act on what it reveals about your system.

Obvious risks: where the duty stops

The duty does not extend to warning customers about risks that are obvious. Under s 5H of the Civil Liability Act 2002 (NSW), a business does not owe a duty to warn a customer of an obvious risk, such as a clearly visible step down or a wet surface the customer can see. There are exceptions. The duty to warn revives if the customer asks for advice or information about the risk, if a written law requires the warning, or if you are a professional providing a service that carries a risk of death or personal injury.

There is a similar protection for recreational activities. Under s 5L of the Civil Liability Act 2002 (NSW), a business is not liable in negligence for harm suffered from the materialisation of an obvious risk of a dangerous recreational activity, such as a customer injuring themselves jumping from a diving board at a pool. These protections do not remove the underlying duty to take reasonable care of the premises. They simply mean you are not expected to state the obvious.

Professionals: a different standard

If you provide professional services, the standard is set by your profession rather than by what the ordinary reasonable person would do. Under s 5O of the Civil Liability Act 2002 (NSW), a professional does not incur liability in negligence if they acted in a manner that was, at the time, widely accepted in Australia by peer professional opinion as competent professional practice. The opinion cannot be relied on if a court considers it irrational, and it does not need to be universally accepted. The practical effect is that a professional is not negligent merely because a course of action turned out badly, so long as peers would regard it as competent.

What kinds of harm count

The duty protects customers against more than physical injury. It can extend to psychiatric harm and, in narrower circumstances, economic loss:

Physical injury: the classic case, covering injuries suffered on your premises or from your goods and services.
Mental harm: under s 31 of the Civil Liability Act 2002 (NSW) there is no liability for pure mental harm unless it consists of a recognised psychiatric illness, and under s 32 the duty only arises where you ought to have foreseen that a person of normal fortitude might suffer such an illness. Ordinary distress or disappointment does not count.
Economic loss: businesses can owe duties not to cause financial harm, for example through negligent advice, but the courts are more cautious here. A duty to avoid pure economic loss generally requires a special relationship, and a lawyer should assess whether one exists in your circumstances.

Consequences of a breach

If a customer sues you for negligence and wins, the court orders your business to pay compensatory damages designed to put the customer back in the position they would have been in. That typically covers medical expenses, past and future loss of earnings, and the cost of care. In New South Wales, damages for non-economic loss such as pain and suffering are only awarded where the severity of the loss is at least 15 per cent of a most extreme case, and are capped at a maximum of $350,000 under s 16 of the Civil Liability Act 2002 (NSW).

The customer must also prove causation. Under s 5D of the Civil Liability Act 2002 (NSW), your negligence must have been a necessary condition of the harm, and the harm must be within the scope of your liability. This is why the inspection log in a slip and fall case matters so much: it goes directly to whether your failure caused the injury.

Two practical points. First, public liability insurance is how most small businesses fund both the defence of a claim and any damages awarded. It does not remove the duty, but it means a single serious claim is less likely to put the business under. Second, the separate consumer guarantee obligations can be enforced by the ACCC and state fair trading regulators, and they cannot be excluded by contract regardless of what your terms say.

Can you contract out of the duty?

You can limit some negligence liability by contract, but the scope is narrower than many businesses assume:

Recreation services: under s 5N of the Civil Liability Act 2002 (NSW), a contract for the supply of recreation services can exclude, restrict or modify liability for breach of an express or implied warranty that the services will be rendered with reasonable care and skill. This is how gyms and adventure operators use waivers. The protection does not apply where the harm resulted from a contravention of a written law that establishes specific practices or procedures for personal safety.
Dangerous recreational activities: as noted above, s 5L removes liability for the materialisation of an obvious risk of a dangerous recreational activity.
Consumer guarantees: you cannot contract out of these at all. Under s 64 of the Australian Consumer Law, any term that purports to exclude, restrict or modify the consumer guarantees is void. A sign saying "no refunds" or a term saying the business is not liable for defective goods does not work.
General negligence: courts construe exclusion clauses strictly, and a clause that tries to exclude liability for personal injury caused by your own negligence will be read narrowly. You cannot exclude liability for deliberate or reckless conduct. Any waiver or exclusion clause should be drafted and reviewed by a lawyer who understands what it can and cannot achieve.

Compliance checklist

Work through these steps to put the duty into practice:

Identify the risks your customers actually face: hazards on your premises, risks in your products, and risks in the way services are delivered.
If customers enter your premises, put a documented inspection and cleaning system in place and keep records.
Train staff to fix hazards immediately and to report incidents.
Use signs or warnings for risks that are not obvious, and do not assume the obvious risk rules protect you from a duty to take reasonable precautions.
Check your terms and conditions: confirm any waiver is valid for your activity type and does not attempt to exclude consumer guarantees.
Review your public liability insurance so you know what a claim would cost the business.
Keep an incident register and act on patterns it reveals.

When to get legal help

A lawyer is most useful at three points. Before a claim: reviewing your terms, waivers and premises practices so the duty is managed rather than reacted to. When a demand letter or claim arrives: assessing whether a duty existed, whether it was breached, what the customer must prove and what the claim is realistically worth. And when designing systems: a negligence lawyer can translate the legal standard into practical inspection, training and record-keeping procedures that fit your industry. The cost of that advice is small compared with a damages award, let alone the stress of defending a personal injury claim.

The lesson from the greasy chip

If there is one part of the duty of care that catches Australian businesses by surprise, it is that the law judges your systems, not your intentions. In Strong v Woolworths the court did not ask whether anyone meant to leave a chip on the floor. It asked whether Woolworths had a reasonable system for finding it, and it did not. The same logic applies to a shop floor, a tradesman's worksite or a professional's advice. This week, walk your premises as a customer would and write down every hazard a person could encounter, then record how and when each one is checked. That list, and the habit of acting on it, is the most direct way to turn the duty of care from a legal abstraction into something your business actually does.