Case Summary: Chappell and Company Limited and Others vs. The Nestle Company Limited

This post has been written by Aditi Singh,  a first year law student from Hidayatullah National Law University, Raipur.

Title of Case : Chappell and Company Limited and Others vs. The Nestle Company Limited

Court : House of Lords

Bench : LORD VISCOUNT SIMONDS, LORD REID, LORD TUCKER, LORD KEITH OF AVONHOLM, LORD SOMERVELL OF HARROW

Date Decided: Jun-18-1959

Appellant: Chappell and Company Limited and Others

Respondent : The Nestle Company Limited

Facts

• Winneton Music Corporation were the sole owners of the copyright of a musical work entitled “Rockin’ Shoes”. The sole licensees were Chappell & Co. Ltd.
• The Hardy Record Manufacturing Co. Ltd. made gramophone records and sold them to Nestlé at four pence for an advertising campaign.
• Nestlé mounted these records on cardboard that contained advertising matter for their chocolates.
• They sold each record for 1s 6d and three wrappers of their six penny milk chocolate bars.
• Under the Copyright Act, 1956, the manufacturer had to notify the owner of the copyright of their intention to reproduce records of their work for retail; which was done by Hardy Record Manufacturing Co.
• The copyright owners were also entitled to 6 and a quarter per cent of the cost of the ‘ordinary retail selling price’ of the record, under the Act.
• The price of the records was considered by the appellants to not be entirely monetary (since the consideration included the sending in of wrappers along with the money), and thus did not consider there to be obedience of the Copyright Act, 1956. This was because they were receiving royalty only on the 1s and 6d, when there was consideration that was not being taken into account when calculating the royalty.
• The appellants filed for an injunction and sued for damages, contending the respondents had infringed their copyright.

Issues

• Could the sweet wrappers constitute good consideration for the purchase of the records; if so the value of the records was not quantifiable and the claim would fail

Arguments Advanced from the side of Petitioner

The wrappers in question represent something of value to Nestlé (thus the condition to send them in along with the money).The appellants though, were receiving royalty only calculated on the monetary value of the consideration, which showed that there was non-compliance with the Copyright Act, 1956. If the wrappers serve as ‘qualification’ to buy the record, then they must have some permanence. The fact that the buyer is demoted from being qualified to buy the record only after a single transaction shows that the wrappers do not represent qualification, but an additional consideration. Thus, the words ‘ordinary retail selling price’ refer to there being a monetary value attached to any sale of goods to the final consumer. “The price of the record is 1s 6d plus an indeterminate ‘x’.”

Arguments advanced from the side of Respondent

The words ‘ordinary retail selling price’ refer to the selling price of the product in normal conditions, as opposed to when the article has to be sold at cut prices. Thus, the owner of the copyright should not receive a blow, by the reduction in royalty, because of the lack of demand. This is done to protect the royalty of the copyright owner. The catalogue price of the records is the price of 1s 6d. The wrappers are of no value and are thus not part of the consideration.

If two people buy Nestlé’s chocolate, the one who wants the record has to pay 1s 6d more to the company and the other one does not need to bother with the mentioned price. The chocolate wrapper only makes them eligible to buy the record and is not part of the price. The chocolate was bought outside of the contract formed to buy the record, and thus including it in the contract for the record as consideration would make it past consideration – which is no consideration. Limitation of sale to a certain eligible class of people does not mean it is not a retail sale. Thus, there is no infringement of the copyright, since there is compliance with the Copyright Act, 1956.

Judgement

• By 3:2 majority in the House of Lords, it was held that the wrappers were part of the consideration price, and an injunction was granted.
• Lord Reid: it is unrealistic to divorce the buying of the chocolate from the supply of the records. The consideration has two parts: (a) the buying of the chocolate bars for the wrappers; and (b) the payment of money.Clearly both are of value to Nestles.
• It was said that the provision of wrappers was merely a condition prior to purchase. But if the qualification is of value to the vendor and must be re-acquired on each occasion, then it is hard not to see this as part of the consideration. Acquiring the wrappers might well involve expenditure which would not otherwise have been incurred.
• Viscount Simonds (dissenting): The wrappers are valueless, and not really evidence of sale of chocolate bars to the purchaser of the record. Hence the acquisition of the wrappers was not really part of the record transaction.

Conclusion

The court in this case held that the Consideration to a contract should be sufficient and need not to be adequate. There was also an example quoted in the judgement, “A contracting party can stipulate for what consideration it chooses. A peppercorn doesn’t cease to be good consideration if it is established that the promise doesn’t like pepper and will throw away the corn.” This example focuses on the importance of sufficiency in the Consideration and moreover this judgement re-affirmed the stance of the English law on consideration. It is said that consideration can be anything and the facts and outcome of the case portray that the ‘anything’ need not be restricted to money.

References

1. Chappell & Co Ltd v Nestle Co Ltd (18.06.1959 – UKHL) : MANU/UKHL/0005/1959
2. https://www.casemine.com/judgement/uk/5a8ff87c60d03e7f57ec1436
3. https://webstroke.co.uk/law/cases/chappel-v-nestle-1960
4. https://indiancaselaws.wordpress.com/2013/01/14/chappell-co-ltd-v-nestle-co-ltd/