Chappell & Co Ltd v Nestle Co Ltd
House of Lords
Citations: [1960] AC 87; [1959] 3 WLR 168; [1959] 2 All ER 701; (1959) 103 SJ 561; [1959] CLY 573.
Facts
The defendants were a record company and a chocolate company (Nestlé). The record company made and sold to Nestlé a number of gramophone records which infringed the claimant’s copyright in music. Nestlé would mount these on cardboard disks bearing advertising for their chocolate, and sell these on to the public. To buy one, a member of the public had to send in three Nestlé chocolate wrappers and pay 1 shilling and six pence.
The claimant sued for copyright infringement and sought an injunction restraining these sales. At the time, there was a special defence to copyright infringement for music records. It allowed infringement if the defendants paid the copyright owner a set royalty based on their retail price. However, it only applied to records intended for ‘ordinary retail sale’.
The defendants sought to rely on this defence. The claimant responded that the records were not intended for ordinary retail sale. They argued that this required any consideration provided to be in money only. Here, part of the consideration was the chocolate wrappers. The defendant disputed that the wrappers formed part of the consideration.
Issue(s)
- What consideration did the customers provide for the records?
- Was the transaction an ‘ordinary retail sale’?
Decision
The House of Lords held in favour of the claimant. The chocolate wrappers were part of the consideration. Under the statute, an ‘ordinary retail sale’ required all the consideration involved to be money. Since part of the consideration was not money, the sales fell outside of the ambit of the defence.
This Case is Authority For…
For the purposes of contract law, the courts are not interested in the adequacy of the consideration. All that matters is that the promise or performance provides some benefit to the other party or imposes some detriment on the promising/performing party.
In this case, Nestlé benefited from the chocolate wrappers. It encouraged chocolate sales and provided them with indirect advertising benefit.
Other
Viscount Simonds and Lord Keith of Avonholm dissented. They thought that the chocolate wrappers were not part of the selling price – they were merely a condition for buying the records with money. They therefore would have held the sales within the ambit of the defence.
