Acid
24-11-07, 10:12 AM
Hi fellow ACCAs!
This is case proving that consideration "need not be adequate" to cerate a valid sale contract .
It was finally decided by the House of Lords in 1960. Chappell was a music publisher and entitled , by the law at that time governing music royalties for music publishers, to a 6.25% royalty of the official retail price of any records sold of people performing music that it had published. ( It is important to appreciate that if the record selling shop chose to sell for less than the "normal price", the publisher's royalty out of the sale proceeds was still 6.25% of the official retail price. .)
Nestlé , who made chocolate bars, offered in advertising to supply a particular pop record (of which they had got hold of a batch from somewhere ) to Nestle chocolate bar buyers; each record was supplied by Nestlé by post in exchange for 3 old (used) bar wrappers plus 1s. 6d. (the 1s 6d I think was only to cover postage).
As you can guess, it was a marketing promotion by Nestlé , to sell more chocolate.
Chappell sued Nestle for royalties of 6.25% of normal retail price for all he records, but Nestle argued it wasn't a sale covered by the royalties awl and in fact that it was not a sale at all as there was no real payment made to them. . The choc bar wrappers were merely thrown in the bin by Nestle on receipt, and had no value to them.
i.e. Nestle tried to argue it was economically like a gift situation from which they made a loss not a profit, and didn't give rise to "sales" royalties.
BUT The judge held that if the consideration that was specified by nestle in the offer (which mentioned an exchange , not a gift) was "3 used wrappers, plus 1s 6d " then that was a valid consideration to create a contract and therefore the publisher's full royalty did arise (at Nestlé's expense) as it was just like any other sale of that record at a discount.
This case is leading case authority for the general rule of English contract law that the contractual consideration agreed by the parties need not be economically adequate for a valid contractual sale to have occurred, with all the legal consequences that flow from that.
(You don't really need the royalties law background above for F4 exam, but I have given it to help you remember the case better. )
This is a very important case in the consideration area of the contrct law!
Knows this well
Best of luck!
Acid
This is case proving that consideration "need not be adequate" to cerate a valid sale contract .
It was finally decided by the House of Lords in 1960. Chappell was a music publisher and entitled , by the law at that time governing music royalties for music publishers, to a 6.25% royalty of the official retail price of any records sold of people performing music that it had published. ( It is important to appreciate that if the record selling shop chose to sell for less than the "normal price", the publisher's royalty out of the sale proceeds was still 6.25% of the official retail price. .)
Nestlé , who made chocolate bars, offered in advertising to supply a particular pop record (of which they had got hold of a batch from somewhere ) to Nestle chocolate bar buyers; each record was supplied by Nestlé by post in exchange for 3 old (used) bar wrappers plus 1s. 6d. (the 1s 6d I think was only to cover postage).
As you can guess, it was a marketing promotion by Nestlé , to sell more chocolate.
Chappell sued Nestle for royalties of 6.25% of normal retail price for all he records, but Nestle argued it wasn't a sale covered by the royalties awl and in fact that it was not a sale at all as there was no real payment made to them. . The choc bar wrappers were merely thrown in the bin by Nestle on receipt, and had no value to them.
i.e. Nestle tried to argue it was economically like a gift situation from which they made a loss not a profit, and didn't give rise to "sales" royalties.
BUT The judge held that if the consideration that was specified by nestle in the offer (which mentioned an exchange , not a gift) was "3 used wrappers, plus 1s 6d " then that was a valid consideration to create a contract and therefore the publisher's full royalty did arise (at Nestlé's expense) as it was just like any other sale of that record at a discount.
This case is leading case authority for the general rule of English contract law that the contractual consideration agreed by the parties need not be economically adequate for a valid contractual sale to have occurred, with all the legal consequences that flow from that.
(You don't really need the royalties law background above for F4 exam, but I have given it to help you remember the case better. )
This is a very important case in the consideration area of the contrct law!
Knows this well
Best of luck!
Acid