Chappell and Co v Nestle Ltd

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.