Legal Case Summary
Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 97
Consideration need not have economic value.
Facts
The defendants, Nestlé, contracted with a company manufacturing gramophone records to buy several recordings of music. The plaintiffs, Chappell & Co, held the copyright in these recordings. Nestlé offered to sell these records at a discount price to anyone presenting three wrappers from their chocolate bars. The wrappers themselves were worthless and were thrown away by Nestle. The plaintiffs sought an injunction restraining the manufacture and sale of the records because they breached copyright.
Issues
The Copyright Act 1956, s.8 allowed for the manufacture of records for retail sale provided that a royalty of 6 ¼ percent was paid to the copyright holder. The question was whether the sale was a ‘retail sale’. The defendants argued that the wrappers were part of the consideration and this was not covered by s.8, which only applied to monetary sales. Consequently, the issue was whether the wrappers were consideration for the sale of records or whether they were merely a qualification for buying the records.
Decision/Outcome
The House of Lords held that the wrappers did form part of the consideration for the sale of records despite the fact that they had no intrinsic economic value in themselves.
Lord Somervell said (at 114):
‘A contracting party can stipulate what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn.’
Therefore, as the wrappers had no monetary value, the sale was not covered by s.8 of the 1956 Act, and the Lords found in favour of the defendants.
Updated 19 March 2026
This case summary remains accurate. Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 97 is a well-established House of Lords authority and the legal principles it establishes — particularly that consideration need not have economic value, and that even a worthless item can constitute good consideration — remain good law and are still routinely cited in contract law teaching and practice.
Readers should note that the Copyright Act 1956, under which the dispute arose, has since been repealed and replaced by the Copyright, Designs and Patents Act 1988. The specific statutory provision at issue (s.8 of the 1956 Act) no longer exists in that form. However, this does not affect the continuing authority of the case on the law of consideration, which is its primary significance. The case is cited today for its contract law principles, not for any ongoing relevance of the 1956 Act’s provisions.
