Chappell & Co v Nestle [1960] AC 87

Court: House of Lords

Facts: Chappell & Co owned the copyright to the song "Rockin' Shoes" by The King Brothers. Nestlé launched a promotional campaign offering records of the song to customers who sent in three chocolate bar wrappers along with a payment of 1s 6d. Under Section 8 of the Copyright Act 1956, a royalty of 6.25% of the "ordinary retail selling price" had to be paid to the copyright owner for records sold. Chappell & Co argued that the payment of 1s 6d did not reflect the ordinary retail selling price and that the three wrappers formed part of the consideration. They sought an injunction, claiming Nestlé had violated the Copyright Act. The case was heard in the House of Lords after the Court of Appeal reversed an initial decision in favor of Chappell & Co.

Issue: Whether the three chocolate bar wrappers constituted part of the consideration for the records, and if so, whether the promotional sale violated the Copyright Act 1956.

Held: The House of Lords held that the wrappers were part of the consideration, granting an injunction to Chappell & Co. The court found that the sale did not qualify under Section 8 of the Copyright Act because the wrappers, though of no intrinsic value, were a form of consideration that benefited Nestlé by encouraging customers to buy their chocolates. As a result, the sale infringed Chappell & Co's copyright.

Key Judicial Statement: Lord Reid explained that the wrappers were part of the consideration as they conferred a benefit upon Nestlé by inducing people to purchase their chocolates. He distinguished this situation from cases involving mere conditions, which would not constitute consideration. The repeated need to acquire the wrappers for each record transaction further reinforced their role as consideration. Viscount Simmonds dissented, arguing that the previous purchase of chocolate for the wrappers was a separate transaction from obtaining the records.

💡Leveluplaw: This case confirmed the principle that consideration must be sufficient but need not be adequate in English contract law. Even trivial or nominal items, like chocolate wrappers, can qualify as valid consideration if they confer some benefit to the other party. The decision emphasized that the law focuses on whether consideration exists, not on its economic value. The ruling also highlighted the distinction between a conditional gratuitous promise and an agreement supported by consideration, which can sometimes blur the lines between valid contracts and promotional offers.