• In the case of Chappell & Co v Nestle [1960] AC 87, the House of Lords ruled that consideration must be sufficient but need not be adequate.
  • This case was about consideration, copyright and contract law.

Facts of the Case

  • D sold C’s records of a tune copyrighted by C alongside chocolate bar wrappers.
  • C pursued an injunction against D for selling them under the retail selling price and therefore breaching s 8 of the Copyright Act 1956.

Issues

  • Were the wrappers partial consideration for the records?

Held by House of Lords

  • Appeal allowed and injunction granted – copyright had been infringed and the wrappers encouraged everyone to eat the chocolates inside thereby constituting as consideration.

Lord Reid

Offer and acceptance

  • “To determine the nature of the contract one must find the intention of the parties as shown by what they said and did. The Nestle Company’s intention can hardly be in doubt. They were not setting out to trade in gramophone records. They were using these records to increase their sales of chocolate. Their offer was addressed to everyone. It might be accepted by a person who was already a regular buyer of their chocolate; but, much more important to them, it might be accepted by people who might become regular buyers of their chocolate if they could be induced to try it and found they liked it. The inducement was something calculated to look like a bargain, a record at a very cheap price.”

Obligation

  • “If a contract under which a person is bound to do something as well as to pay money is a sale, then either the price includes the obligation as well as the money, or the consideration is the price plus the obligation. And I do not see why it should be different if he has to show that he has done something of value to the seller. It is ‘to my mind illegitimate to argue—this is a sale, the consideration for a sale is the price, price can only include money or some- thing which can readily be converted into an ascertainable sum of money. therefore anything like wrappers which have no money value when delivered cannot be part of the consideration.”

Lord Somervell

Consideration

  • “A contracting party can stipulate for 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. As the whole object of selling the record, if it was a sale, was to increase the sales of chocolate, it seems to me wrong not to treat the stipulated evidence of such sales as part of the consideration. For these reasons I would allow the appeal.”
  • This case established that small amounts can constitute as consideration.

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