Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87
Facts
Nestlé offered gramophone records to members of the public in exchange for a small sum of money and three chocolate wrappers. The promotion was designed to encourage purchases of its chocolate. Chappell owned copyright in music recorded on the discs and challenged the arrangement under the statutory licensing provisions then in force. Nestlé treated the cash payment as the selling price and argued that the wrappers had no financial value. The wrappers were thrown away after receipt, but providing them was a stated requirement for obtaining a record.
Legal Issue
Were the chocolate wrappers part of the consideration and relevant selling price for the records, despite having negligible value after receipt?
Held
The House of Lords held by a majority that the chocolate wrappers formed part of the consideration for the records. Nestlé had stipulated for them as part of its promotional offer. Their negligible value once received, and the fact that they were discarded, did not prevent them being part of the requested exchange.
The promotion sought to encourage chocolate sales, so treating the wrappers as irrelevant overlooked the commercial arrangement. This mattered to the statutory copyright scheme and the calculation based on the retail selling price. The case therefore arose in a copyright dispute, but its enduring contract point is that the law does not ordinarily require the consideration chosen by the parties to be economically equivalent to the promise received.
⭐ Legal Principle
Consideration must be legally sufficient but need not be economically adequate. An item or act stipulated as part of the bargain may constitute consideration even if it has little value to the promisor after receipt. The court identifies the requested exchange rather than appraising a fair price.
Significance
Chappell illustrates the distinction between sufficiency and adequacy through a promotional transaction. The wrappers mattered because Nestlé requested them as part of obtaining the record, not because courts attributed an independent market value to discarded paper. This is different from deciding whether an act was past consideration, an existing duty or merely a condition of receiving a gift. The copyright setting should also be acknowledged without treating the historical statutory mechanism as a description of current copyright law.
Common exam questions about this case
Why were discarded wrappers still consideration?
Nestlé expressly required them as part of the exchange for a record. Their role in encouraging chocolate sales explained the bargain, even though Nestlé discarded the paper after receipt. Consideration does not cease to exist simply because its recipient assigns little continuing value to the thing requested.
Does the case require consideration to match the value of the promise?
No. It distinguishes legal sufficiency from economic adequacy. Courts ordinarily leave parties to choose the value of their exchange. However, that does not remove the need for a genuine bargain or resolve separate questions such as duress, statutory unfairness or whether an act was already completed before the promise.
Why is the copyright context relevant to the decision?
The statutory licensing arrangements made the content of the retail selling price important. Including the wrappers affected whether the promotion complied with that scheme. Contract students use the reasoning about the stipulated exchange, while recognising that the litigation concerned a particular historical copyright provision rather than a standalone action enforcing a promise.