Case Brief: Chappell & Co. Ltd. v. Nestle Co. Ltd.

Case Brief: Chappell & Co. Ltd. and Anr. v. Nestle Co. Ltd. and Anr.

Citation: [1959] AC 87

Court: House of Lords.

Presiding Judges: Viscount Simonds, Lord Reid, Lord Tucker, Lord Keith of Avonholm and Lord Somervell of Harrow.

Decided: 18 June 1959.

Judicial History: Motion hearing was held in favour of plaintiffs. Upon appeal, the Court of Appeal reversed that decision. The original plaintiffs appealed the Court of Appeal decision to the House of Lords.

Facts of Chappell & Co. Ltd. and Anr. v. Nestle Co. Ltd. and Anr.

• 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 in Chappell & Co. Ltd. and Anr. v. Nestle Co. Ltd. and Anr.

• Were the three wrappers of Nestlé’s six penny milk chocolate bar part of the consideration or merely qualification to buy the record?
• What is an ‘ordinary retail selling price’?

Appellants’ Arguments

• 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’.”

Respondents’ Arguments

• 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: Chappell & Co. Ltd. and Anr. v. Nestle Co. Ltd. and Anr.

• The court held by a majority that the wrappers were part of the consideration.
• The fact that they were worthless to the company did not make them ineligible to serve as consideration.
• The company was not a record selling company but a chocolate company.
• It was boosting the sales of its chocolates by presenting a special offer at which the records could be bought (relatively inexpensively) upon buying the chocolates.
• Thus, the wrappers were held to be a part of the consideration since they meant something to the company.
• It was also held that an ordinary retail selling price can include only money (on which royalty can be calculated) and thus, the respondents were non-compliant with the Copyright Act, 1956.

Judgement

Applicable

Conclusion

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.

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Author Details: Manan Parekh (Jindal Global Law School)

The views of the author are personal only. (if any)