Case Facts
The case concerned a promotional scheme operated by Nestlé Co Ltd, the first respondent, in which members of the public could obtain a gramophone record of the dance tune Rockin' Shoes by sending 1s. 6d. together with three wrappers from sixpenny packets of Nestlé milk chocolate. The records were manufactured on thin cellulose acetate film by Hardy Record Manufacturing Co Ltd, the second respondent, and mounted on cardboard discs supplied by Nestlé bearing chocolate advertising matter. Hardy sold each record to Nestlé at fourpence per record. The wrappers themselves were commercially worthless and were thrown away by Nestlé upon receipt; the entire purpose of requiring them was to promote the sale of Nestlé chocolate.
The copyright in Rockin' Shoes was owned by Winneton Music Corporation, the second appellants, who had granted an exclusive licence to Chappell & Co Ltd, the first appellants. Hardy gave notice of its intention to manufacture the records under s 8(1)(b) of the Copyright Act 1956, which provided a compulsory licensing regime permitting a manufacturer to make gramophone records of a musical work without the copyright owner's consent, provided — amongst other conditions — that the manufacturer intended to sell the records by retail and paid a royalty of 6¼% of the "ordinary retail selling price." Hardy stated 1s. 6d. as that price and offered to pay the corresponding royalties. The appellants refused and brought proceedings for infringement of copyright.
The Copyright Royalty System (Records) Regulations 1957 (SI 1957/866) defined "ordinary retail selling price" as the marked or catalogued selling price of single records to the public, or, if none, the highest price at which single records were ordinarily sold to the public, exclusive of purchase tax. The central question was whether 1s. 6d. alone constituted that price when the sending of three chocolate wrappers was also required as a condition of obtaining the record.
Upjohn J at first instance granted an injunction restraining the respondents from infringing the copyright. The Court of Appeal, by a majority of Jenkins and Ormerod LJJ (Romer LJ dissenting), allowed the respondents' appeal. The appellants appealed to the House of Lords.
Held
The House of Lords, by a majority of 3:2, reversed the Court of Appeal and restored the injunction granted at first instance. The majority (Lord Reid, Lord Tucker, and Lord Somervell of Harrow) held that, whilst the transactions did constitute sales by retail, the three chocolate wrappers formed part of the consideration for each sale. Because s 8 of the Copyright Act 1956 contemplated that the "ordinary retail selling price" would be a money sum constituting the entirety of the consideration, and since the consideration here was not solely monetary, the respondents' operations fell outside the statutory compulsory licensing scheme. Accordingly, the respondents had infringed the appellants' copyright.
The minority — Viscount Simonds and Lord Keith of Avonholm — dissented on the ground that the wrappers formed no part of the selling price. In their view, the requirement to send wrappers was merely a qualification or condition for being entitled to purchase the records, not part of the consideration itself. On that analysis, the transaction fell within s 8 and there was no infringement.
Ratio Decidendi
The ratio of this decision is rooted in copyright law rather than in the general law of contract. For the purposes of s 8 of the Copyright Act 1956, the majority held that the chocolate wrappers were part of the consideration for the retail sale of the records. Because the consideration was not exclusively monetary, it was impossible to identify a single "ordinary retail selling price" expressed as a money sum, as the statute required. The compulsory licensing regime was therefore unavailable to the respondents, and the manufacture and sale of the records without the copyright owners' consent constituted infringement.
Underpinning this conclusion is a principle of broader application in the law of contract: consideration need not be adequate in the sense of being economically equivalent to what is received, but it must be something of legal value. The chocolate wrappers, though thrown away immediately upon receipt and intrinsically worthless, were nonetheless part of the consideration because Nestlé required their acquisition and delivery as a condition of the transaction, and doing so served Nestlé's own commercial purpose of promoting chocolate sales. The fact that Nestlé derived no monetary value from the wrappers themselves was irrelevant; what mattered was that they were stipulated as a prerequisite and were therefore legally sufficient to form part of the consideration.
It should be noted that the Copyright Act 1956 has since been repealed and replaced by the Copyright, Designs and Patents Act 1988, which does not replicate s 8 in the same form. The statutory context of the ratio therefore no longer applies in its original form, though the case retains lasting significance for the contract law principle it illustrates.
Obiter Dicta
Lord Somervell of Harrow delivered what is now one of the most frequently cited dicta in the English law of contract on the doctrine of consideration. Addressing the argument that the wrappers could not constitute consideration because they were valueless, he stated: "A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn."
This dictum neatly encapsulates the distinction between the adequacy and the sufficiency of consideration. The law does not require that consideration be of commensurate economic value to what is promised in return — courts will not inquire into the adequacy of a bargain struck between competent parties. What is required is only that consideration be legally sufficient: that is, that it constitute something of legal value moving from the promisee. Even an item of no commercial worth can satisfy this requirement, provided it is genuinely bargained for. This principle connects the case to the foundational statement of consideration in Currie v Misa (1875) and is regularly applied alongside cases such as White v Bluett (1853), where the courts have similarly refused to strike down bargains on grounds of inadequacy of consideration alone.