Contract Law Case Study: Novartis

This assignment presents a case study centered on a contractual dispute involving Novartis. Students are tasked with analyzing the case, applying relevant legal theories such as literalism, and evaluating the impact of the court's decision on Novartis' business practices.

Running head: LAW OF INTERPRETATION AND THEORY
Law of Interpretation & Theory
Name of the Student
Name of the University
Author Note

1
LAW OF INTERPRETATION AND THEORY
Introduction
The relevance of the interpretation of legislation is developing in the Republic of South
Africa. It is recognized all over that the fiscal legislation is vital and it affects the lives of the
citizens of Africa including the taxpayers of the Country.
The evaluation of this fiscal legislation is carried along with the balancing of the
competitive interest. The rule of interpretation is applied only after considering the constitution
of legislation. The source of appeal in the Supreme Court in the legal system of South Africa is a
part of the legislation1. The current approaches to the interpretation have impact on the taxpayers
and have impact on the residents of the Republic of South Africa. The Supreme Court has
interpreted the statutory legislation and has adhered to the regulation.
In the recent case which has been taken up in the matter of Supreme Court Appeal which
relates to a case between the appellate herein referred to as Novartis South Africa (Pty) Ltd and
the defendant Maphil Trading (Pty) Ltd.
Citing of the Case: Novartis v Maphil
Passing of the Order of Appeal: The High Court of Gauteng Local Division, Johannesburg
(Boruchowitz J)2
1 Affinito, Letizia, and John Mack. Socialize Your Patient Engagement Strategy: How Social
Media and Mobile Apps Can Boost Health Outcomes. Routledge, 2016.
2 Baum, Lawrence. The Supreme Court. CQ press, 2015.

2
LAW OF INTERPRETATION AND THEORY
Judgment: In this case the question which is to be answered is an appeal or a contract between
the parties Novartis South Africa herein called the appellant and Maphil Trading (Pty) Ltd
referred to as the respondent3. In this case the appellant was guilty of the repudiation of the
contract and the respondent would be entitled for the damages occurred.
The appellant in this case is Novartis which is a subsidiary company of the
pharmaceutical company which is based in Switzerland. The company had its division in South
Africa and it supplied medicines to hospitals. They came up with a strategy that the business
manager had put a logo that the packaging on the medicines. In this contact the company treated
Novartis contract as a repudiation of contract and claimed a suit or action against the damages
for the breach of the contract.
In this case the appellant Novartis met with the respondent Maphil and decided that both
the companies will enter into an agreement or a arrangement where Maphil, the respondent will
receive a marketing fee of 3.5 million since they put the Sandoz branding on the which was to be
supplied by the respondent Maphil.There was a marketing agreement which was accepted by
Maphil4. The facts presented by Maphil, the respondent are important for understanding of the
3 Conde Gutiérrez, Carlos Augusto. Access to Genetic Resources and Intellectual Property
Rights: Opportunities and Perils for Developing Countries Rich in Biodiversity and the
Pharmaceutical Industry. Diss. University of Sheffield, 2015.
4 Dugard, Jackie. "Testing the transformative premise of the South African Constitutional Court:
A comparison of High Courts, Supreme Court of Appeal and Constitutional Court socio-
economic rights decisions, 1994–2015." The International Journal of Human Rights 20.8 (2016):
1132-1160.

3
LAW OF INTERPRETATION AND THEORY
judgment. In respect of the agreement between Novartis and Maphil, the Maphil products bear
the Sandoz logo. The respondent confirmed the details of the marketing logo.
Later Novartis, the appellant told Maphil, the respondent stating that there was no
contract between both of the parties and the appellant will not be paying to the respondent the
amount of invoice raised by the respondent. Thus the respondent created Novartis action as a
repudiation of contract and then the respondent instituted an action against the appellant and
claimed for the action and the damages for breach of the contract.
The statutory provision interpreted by the Supreme Court of Appeal:
In this case the Court has held “the interpretative process is one of ascertaining the
intention of the parties”. In this case the Court considers the circumstances evolving around the
contract and also determines the intension of conclusion of the agreement.
In this case Sandoz confirms to the marketing activities which was challenged with
litigation5. The Judge Boruchowitz J had read the contract thoroughly and found that the contract
was proved by both the parties. The appellant had from the findings of the appeal and contended
that the Court has not given the direction in assessing the evidence. It is seen that the Court have
not applied the rules of interpretation of contract.
Firstly, in the interpretation of the Case and in deciding the contact Novartis must have
used the words and construe them objectively. The case relates to the integration rule where it is
5 Dukes, Graham, John Braithwaite, and James P. Moloney. Pharmaceuticals, corporate crime
and public health. Edward Elgar Publishing, 2014.

4
LAW OF INTERPRETATION AND THEORY
a part of law. It is said that a “complete memorial of a jural act, extrinsic evidence may not
contradict”.
Secondly, in interpreting the case it is found that it is a matter of law and not a matter of
fact. It is said in the matter of jurisprudence that the interpretation by the Court is a “matter for
the Court and not for witnesses”
Thirdly, the rule of evidence in the law is not dependent on the nature of the document or
contact whether the statutes hold or not6. The “inevitable point of departure is the language of
the provision itself”
“There is no doubt that, where in the course of negotiating a contract the parties reach
an agreement by offer and acceptance, the fact that there are still a number of outstanding
matters material to the contract upon which the parties have not yet agreed may well prevent the
agreement from having contractual force”
Case Conclusion: It was concluded that the Court found that there was a contact, which
was enforceable between the parties, and Novartis repudiated it7. Thus, Novartis had to pay to the
6 Halabi, Sam F., Lawrence O. Gostin, and Jeffrey S. Crowley, eds. Global Management of
Infectious Disease After Ebola. Oxford University Press, 2016.
7 Kelly-Louw, Michelle. "Must All the Required Documents for a Demand Guarantee Be
Presented at the Same Time?–Kristabel Developments (PTY) LTD V Credit Guarantee
Insurance Corporation of Africa Limited." (2017).

5
LAW OF INTERPRETATION AND THEORY
respondent for the damages with an amount, which included the interest and the cost of suit.
Thus the appeal was dismissed on the ground that the cost to be borne.
Interpretative Approach of the Court
All unrepealed statutes remain law
 In the Novartis SA v Maphil, the issue related to the Novartis who had to pay for the
damages to Maphil and pay for the cost claimed.
 Interpretation is referred to as the matter of law and not matter of fact. This was the
interpretation which portrayed that the case referred is a matter of law and to be
determined as per legal understanding and interpretation8.
 This Court could not change the or introduce the objective approach which was argued by
Novartis and which was also regarded only to the words mentioned on the paper9.A Court
shall also determine the context so as to determine what the order was intended for.
 Interpretation adopted by this court in Coopers & Lybrand & others v Bryant . It had
been seen that there is a distinction between the background and their surrounding
circumstances and if there is ambiguity in language the Court will be looking at the
surrounding
8 Magowan, Nick, and Jessica Frost. "A contract is the sum of its parts: contract law." Without
Prejudice 15.10 (2015): 50-51.
9 Russell, Peter H. "Selecting Supreme Court Justices: Is Trudeau's Sunny Way a Better
Way." UNBLJ 68 (2017): 3.

6
LAW OF INTERPRETATION AND THEORY
In case of judicial interpretation, it is the way how the judiciary interprets the law such as
constitution and legislation. There is a procedure how the judiciary approaches is a systematic
process in case of interpretation of the law10. Different person can interpret the laws differently
so a basic set of principle are being set to interpret the laws.
The basic rules of interpretation are:
1. Theory for literalism –As per the theory of literalism as construed in the meaning of the
statute. The word literalism is interpreted as per their plain and ordinary meaning. It is
said that if the words are clear then it must be applied even if the intension of the
legislator may be harsh or undesirable.
Legislative Provisions of the literal rule
 It has a restriction on the role of the judge
 It provides that there is no scope for the judges to use their own opinions or prejudices
 The rules upholds that there is separation of powers
 It recognises the Parliament as the Supreme law maker
2. Theory of Internationalisms - Internationalism is termed as a political principle, which
changes the term nationalism and advocates among the people greater political or
economic cooperation among the people. The supporter of this theory of interpretation is
known as the principle of internationalism.
10 Van Eeden, Dave. The Role of the Chief Human Resources Officer: Perspectives, Challenges,
Realities and Experiences. Knowres Publishing, 2014.

7
LAW OF INTERPRETATION AND THEORY
Statutory Provisions
This is believed that people all over the World should unite across the national, political,
cultural and racial boundaries to advance on their common interests. The Government of
the World should cooperate on their mutual and long-term interest other than their short-
term disputes.
3. Theory of Literalism-cum-internationalisms – The question of determining the
legislative intent, which is currently labeled as internationalisms. The theory of
legislative intention is primary touchstone of interpretation. Internationalists are willing
to consider and rely on any evidence of legislative intent so long as it meets a threshold
test of relevance and reliability. The textualists have an eye on the text and refuse to look
at the text and refuse to look at anything that might contradict the literal meaning.
Internationalists go looking for trouble. When there is a discrepancy, if the extra-textual
evidence is sufficiently compelling, the internationalist must reject literal meaning and
give effect to the legislature's apparent intent.
4. Theory of Purposivism - The purposive approach or the theory of purposivism is a
theory of law of interpretation and this approach to the statutory and common law
enactment, which is a statute or clause under the constitution.
Statutory legislation
The purposive interpretation is derived from the mischief rule. Courts use the purposive
interpretation for the purposive pre-enactment phase of legislation. It includes the drafts, the
committee papers, and the white papers. The purposive interpretation involves a rejection of
the rule. A legal construction combines the elements including the intention of the author of the

8
LAW OF INTERPRETATION AND THEORY
text, whereas the objective elements, which include the intention of the reasonable author and the
legal system, are fundamental values.
Theory used in the Case
The theory the court used in this case is the Theory for literalism. This theory is related to this
case because it is used with respect to the case construed in the meaning of the statute. In the
case, the Court was tasked while deciding whether taken together a written document, oral
agreement and certain emails which constituted a valid contract. In this case the theory upholds
the powers of the jurisdiction and therefore it recognizes the Parliament as the Supreme law
maker.
Conclusion
In this case Novartis has a very important implication on their business where the overwhelming
majority for such business communication has taken place. It is also important to note that the
main issue case in this Novartis case where both the parties had and meant to bind them
contractually. In this case, it was determined that the parties intended to bind them contractually,
and the court examined that all the facts that were proven was to show their intention to enter the
contract – “the contemporaneous documents, their conduct in negotiating and communicating
with each other, and, importantly, the steps taken to implement the contract.”

9
LAW OF INTERPRETATION AND THEORY

10
LAW OF INTERPRETATION AND THEORY
References
Affinito, Letizia, and John Mack. Socialize Your Patient Engagement Strategy: How Social
Media and Mobile Apps Can Boost Health Outcomes. Routledge, 2016.
Baum, Lawrence. The Supreme Court. CQ press, 2015.
Conde Gutiérrez, Carlos Augusto. Access to Genetic Resources and Intellectual Property Rights:
Opportunities and Perils for Developing Countries Rich in Biodiversity and the Pharmaceutical
Industry. Diss. University of Sheffield, 2015.
Dugard, Jackie. "Testing the transformative premise of the South African Constitutional Court:
A comparison of High Courts, Supreme Court of Appeal and Constitutional Court socio-
economic rights decisions, 1994–2015." The International Journal of Human Rights 20.8 (2016):
1132-1160.
Dukes, Graham, John Braithwaite, and James P. Moloney. Pharmaceuticals, corporate crime
and public health. Edward Elgar Publishing, 2014.
Halabi, Sam F., Lawrence O. Gostin, and Jeffrey S. Crowley, eds. Global Management of
Infectious Disease After Ebola. Oxford University Press, 2016.
Kelly-Louw, Michelle. "Must All the Required Documents for a Demand Guarantee Be
Presented at the Same Time?–Kristabel Developments (PTY) LTD V Credit Guarantee
Insurance Corporation of Africa Limited." (2017).
Magowan, Nick, and Jessica Frost. "A contract is the sum of its parts: contract law." Without
Prejudice 15.10 (2015): 50-51.

11
LAW OF INTERPRETATION AND THEORY
Russell, Peter H. "Selecting Supreme Court Justices: Is Trudeau's Sunny Way a Better
Way." UNBLJ 68 (2017): 3.
Van Eeden, Dave. The Role of the Chief Human Resources Officer: Perspectives, Challenges,
Realities and Experiences. Knowres Publishing, 2014.
Visintin, Francesca, and Daniel Pittino, eds. Fast Growing Firms in a Slow Growth Economy:
Institutional Conditions for Innovation. Edward Elgar Publishing, 2016.
Wolfe Jr, Donald J., and Michael A. Pittenger. Appeals and Certification of Questions of Law to
the Supreme Court of Delaware. Vol. 1. Corp and Commercial Practice in the Delaware Court of
Chancery, 2016.