Chappell & Co. Ltd. v. Nestle Co. Ltd.

Chappell & Co. Ltd. v. Nestle Co. Ltd.

[1960] AC 87

(Condition v. Consideration, adequacy of consideration)

FACTS:

C were owners of copyright of a tune called ‘Rocking Shoes’ and N were manufacturers of chocolate who were selling to the public these records in return for 1s6d and three wrappers of chocolate bars manufactured by N. Under the statutory provision then in force, N were required to pay certain percentage of ‘ordinary retail selling’ price to C. C contended that N couldn’t rely on statute for it contemplated price consisting of money alone, whereas in this case consideration for records included  three chocolate wrappers also.

ISSUE: Whether chocolate wrappers formed a part of consideration?

HELD:

Court of Appeal: The three wrappers to be sent by anyone wishing to purchase records wasn’t part of the consideration for it acted as mere condition seeking to limit the class of the purchasers. Acc to Jenkins wrappers couldn’t constitute consideration because: Firstly, wrappers presented by given purchaser need not necessarily represent chocolate brought by him, Secondly, whatever price for which chocolate bars were sold and whatever profit Nestle got out of their sales was wholly attributable to and exhausted by the purchase of the chocolate. Thirdly, they acted as mere condition and not an addition to consideration.

House of Lords:  Court of Appeal decision overturned by a bare majority.

A valuable consideration may consist in some right, interest, profit or benefit accruing to the promisor or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the promisee or any third party.

Here the wrappers formed part of the consideration for they evidenced purchase of three chocolates manufactured by Nestle and hence were of value to them; “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.”

Nestlé’s contention that acquiring and delivering the wrappers was merely a condition which gave the qualification to purchase and wasn’t part of the consideration doesn’t hold well:

“Where qualification is the doing of something of value to the promisor, and where qualification only suffices for one sale and same must be required for another sale, such repeated acquisitions of qualifications is nothing but the part of consideration for the sales.”

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)