Chappell & Co v Nestlé ([1960] AC 87)
Consideration need not be adequate — a simple, student-first explainer with timeline, IRAC, mnemonics, and FAQs.
Table of Contents
Quick Summary
Nestlé ran a promo: send 3 chocolate wrappers + 1s 6d to get a music record. Chappell (copyright owner) said the price for royalty should include the wrappers. The House of Lords agreed: the wrappers were part of consideration. Consideration need not be “enough”; it just has to be something bargained for.
Issues
- Do used toffee/chocolate wrappers count as valid consideration?
- Must consideration be adequate in value to be valid?
- Was Chappell entitled to an injunction on copyright royalty grounds?
Rules
Consideration Need Not Be Adequate
If it is real and bargained for, even something small (like wrappers) is enough in law.
Promotional Items Can Count
Where the motive is increased sales, items that push sales (wrappers) may form part of the price/consideration.
Facts (Timeline)
Arguments
Appellant (Chappell & Co)
- Wrappers are part of the price/consideration.
- Royalty must reflect their value; Nestlé’s notice invalid.
- Injunction required to protect copyright royalty scheme.
Respondent (Nestlé)
- Wrappers are valueless waste; only cash counts.
- Even if wrappers matter, they’re impossible to value for royalty.
- Notice complied with the statute; sales lawful.
Judgment
Held: For Chappell. The wrappers were part of the consideration. Consideration need not be adequate; it must simply exist and be bargained for. As a result, Nestlé’s pricing for royalty purposes was flawed.
Relief: Injunction granted; Nestlé could not continue selling the records on those terms.
Ratio Decidendi
Any item that a promisor bargains for and that furthers its interests (here, boosting chocolate sales) can be consideration. Courts do not measure adequacy—only existence and legal value.
Why It Matters
- Anchor case for the rule that consideration need not be adequate.
- Shows how marketing promotions can shape contract analysis.
- Important for royalty/price calculations tied to “ordinary retail price.”
Key Takeaways
- Wrappers = valid consideration because they drive sales.
- Law checks for some value, not a fair market exchange.
- Promotions can affect statutory royalty outcomes.
Mnemonic + 3-Step Hook
Mnemonic: “Wrappers Work as Wages.”
- Wrappers: Part of the bargain.
- Work: They boost sales → value.
- Wages: Count toward the price/royalty.
IRAC Outline
Issue
Do chocolate wrappers count as consideration; must consideration be adequate?
Rule
Consideration only needs to be real and bargained for, not adequate in value.
Application
Wrappers promoted Nestlé’s sales; Nestlé required them; therefore they formed part of the price.
Conclusion
Wrappers = consideration; injunction granted to Chappell.
Glossary
- Consideration
- Something of value exchanged to support a promise.
- Adequacy
- How “enough” the consideration is—not required by law.
- Injunction
- Court order stopping a party from acting in a certain way.
FAQs
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