Chappell v Nestle [1960]
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Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1 confirmed the traditional doctrine in English contract law that consideration must be sufficient but need not be adequate. The dispute revolved around the interpretation of the Copyright Act 1956, specifically Section 8, which required a royalty payment to be made to the owners of copyrights based on the ordinary retail selling price.
Nestlé was distributing records of the copyrighted song Rockin’ Shoes by The King Brothers as part of a promotional offer. They were giving away these records to individuals who sent in three wrappers from 6d chocolate bars along with an additional payment of 1s 6d. Chappell & Co, the copyright owners, argued that the 1s 6d payment was not the ordinary retail selling price required by the Copyright Act 1956, and they sought an injunction for the alleged breach of the Act.
The central question was whether the wrappers could be considered as partial consideration for the records. Mr Justice Upjohn initially granted an injunction in favour of Chappell & Co, but the Court of Appeal, with a dissenting opinion from Lord Justice Romer, reversed this decision. The case then proceeded to the House of Lords, where the traditional doctrine that consideration must be sufficient but need not be adequate was confirmed.
The House of Lords ultimately sided with Nestlé, holding that the wrappers constituted valid consideration for the records, even though the wrappers themselves had little or no intrinsic value. Lord Somervell expressed the principle that a contracting party can stipulate any consideration they choose, and even if that consideration has no economic value in itself, it still qualifies as valid consideration. He used the analogy of a peppercorn, stating that it does not cease to be good consideration just because the promisee does not like pepper and intends to throw away the corn.
This decision reinforced the flexibility of the doctrine of consideration in contract law, emphasising that the law is concerned with the presence of consideration rather than its economic adequacy. It highlighted the principle that consideration, while necessary for a valid contract, does not always have to possess economic value.
Nestlé was distributing records of the copyrighted song Rockin’ Shoes by The King Brothers as part of a promotional offer. They were giving away these records to individuals who sent in three wrappers from 6d chocolate bars along with an additional payment of 1s 6d. Chappell & Co, the copyright owners, argued that the 1s 6d payment was not the ordinary retail selling price required by the Copyright Act 1956, and they sought an injunction for the alleged breach of the Act.
The central question was whether the wrappers could be considered as partial consideration for the records. Mr Justice Upjohn initially granted an injunction in favour of Chappell & Co, but the Court of Appeal, with a dissenting opinion from Lord Justice Romer, reversed this decision. The case then proceeded to the House of Lords, where the traditional doctrine that consideration must be sufficient but need not be adequate was confirmed.
The House of Lords ultimately sided with Nestlé, holding that the wrappers constituted valid consideration for the records, even though the wrappers themselves had little or no intrinsic value. Lord Somervell expressed the principle that a contracting party can stipulate any consideration they choose, and even if that consideration has no economic value in itself, it still qualifies as valid consideration. He used the analogy of a peppercorn, stating that it does not cease to be good consideration just because the promisee does not like pepper and intends to throw away the corn.
This decision reinforced the flexibility of the doctrine of consideration in contract law, emphasising that the law is concerned with the presence of consideration rather than its economic adequacy. It highlighted the principle that consideration, while necessary for a valid contract, does not always have to possess economic value.
