Chappell & Co v Nestle [1960] AC 87

Key point

  • Nominal consideration (i.e. consideration of trivial value) is valid consideration

Facts

  • Chappell (C) owned the copyright to a tune ‘Rockin’ Shoes’
  • Nestle (D) offered records of the tune for the price of 1 shilling 6 dimes (1s 6d) along with 3 chocolate bar wrappers
  • S8 of the Copyright Act 1956 permitted the making of records for sale provided notice was given to owner of the copyright and a royalty of 6.25% was paid of the ‘ordinary retail selling price’
  • For s8 to be applicable the consideration must only be money price

Issue

  • Were the wrappers part of the consideration?

Held (House of Lords)

  • Injunction granted
  • The wrappers were part of the consideration, thus the sale did not come under s8 and was thus infringing D’s copyright

Lord Reid

The wrappers were part of the consideration

  • It conferred a benefit upon Nestle by inducing people to try their chocolates
  • The offer was addressed to everyone and might be accepted by a person who was induced to try it

The wrappers were not just a condition

  • Conditions limit the offer to persons qualified, such as members of a club
  • Here, the qualification confers a benefit, only suffices for one sale and must be re-acquired before another
  • Repeated acquisitions of qualification are parts of the consideration

Viscount Simmonds dissenting

  • The previous purchase of chocolate to obtain the wrappers is separate from the transaction to obtain the records

Commentary

  • It is difficult to distinguish between a conditional gratuitous promise and an agreement supported by consideration