A professional's duty to exercise reasonable care and skill has two sources sitting alongside each other. The common-law duty in tort is the one most often discussed; the statutory duty is at least as important, and for many engagements it is the primary contractual peg on which a claim will hang. That statutory duty comes from section 13 of the Supply of Goods and Services Act 1982 for business-to-business work, and section 49 of the Consumer Rights Act 2015 for consumer work.
The Supply of Goods and Services Act 1982 closed a gap left by earlier legislation, which had addressed sales of goods but not services. Part II (sections 12 to 16) sets out implied terms for contracts under which a person agrees to carry out a service in the course of a business. Since the Consumer Rights Act 2015 came into force on 1 October 2015, the SGSA has been disapplied in relation to consumer contracts, but it remains the governing statute for business-to-business services in England, Wales and Northern Ireland.
Section 13 provides that in a contract for the supply of a service, where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill. The term is implied by statute — the parties do not need to write it into the engagement letter for it to apply. It runs alongside the tortious duty, giving the client concurrent claims in contract and in tort under Henderson v Merrett Syndicates [1995] 2 AC 145.
For consumer contracts entered into on or after 1 October 2015, the equivalent provision is section 49 of the Consumer Rights Act 2015, drafted in materially the same terms but sitting within a consumer-protection regime that limits what can be excluded. The underlying standard is common to both.
The statutory implied term does not displace the tortious duty; the two co-exist. This matters for limitation and remedies. Contractual claims run from breach; tortious claims run from the date damage is suffered. Damages in contract reflect the position the client would have been in had the contract been properly performed; in tort, the position had the negligent act not occurred.
Section 16 of the SGSA preserves the parties' freedom to agree express terms that vary or exclude the implied terms, but any variation is subject to the Unfair Contract Terms Act 1977. UCTA section 2(1) makes exclusion of liability for death or personal injury caused by negligence void. UCTA section 2(2) subjects any exclusion of liability for other loss to the reasonableness test in section 11 — relative bargaining power, availability of insurance, whether the client received an inducement, and whether the term was known to the parties are all relevant.
Consumer engagements are treated more protectively. Section 57 of the Consumer Rights Act 2015 provides that a term of a consumer contract is not binding to the extent that it would exclude or restrict the trader's liability under section 49 below the trader's actual liability. Any cap that reduces the professional's exposure below what the consumer has actually lost through negligent service is likely to be unenforceable.
Whether the claim is framed under section 13 SGSA, section 49 CRA or in tort, the evidential task is the same. The claimant must prove, usually through expert evidence from a peer practitioner, what a reasonably competent professional in the same field would have done in the same circumstances, and that the defendant fell below that standard. See the related entry at reasonable competence standard in PI claims.
Worked example: A consultancy firm engages a firm of chartered accountants under a written engagement letter to conduct due diligence on a corporate acquisition. The accountant misses a material historic tax liability, which crystallises against the buyer after completion. The claim proceeds on two limbs: breach of the section 13 SGSA implied term of reasonable care and skill, and breach of the concurrent tortious duty. The engagement letter contained an aggregated liability cap of £1 million. Because the client is a business, the cap is examined under UCTA section 2(2) and the reasonableness test in section 11. The court considers relative bargaining power, the availability and terms of the accountant's PI cover, whether the cap was individually negotiated, and whether it was clearly drawn to the client's attention. If the cap is UCTA-reasonable, it holds. Contrast the same accountant advising an individual consumer under section 49 of the Consumer Rights Act 2015: any cap that reduces the accountant's liability below the consumer's actual loss would engage section 57 CRA and would very likely be void to that extent.
For firms in scope — accountants, solicitors, architects, surveyors and independent financial advisers — the statutory implied term is the foundation of most engagement-letter claims. Whether an aggregate cap holds depends on UCTA reasonableness for commercial clients, and on CRA section 57 for consumer clients. That shapes the sum insured a firm needs and how its engagement letters should be drafted.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.