In a society ruled by law, it is essential that the law is applied in the same way to those in similar situations. This way people know when they are breaking "the law". It also ensures that citizens are treated fairly, in the sense of being subject to the same judgement.
The system is then very different from the civil law in which judges have no power to create the law, to make it.
In simple terms the doctrine of judicial precedent, also known as the doctrine of "stare decisis" (let the decision stand), means that when a judge comes to try a case he must proceed by analogy and always look back to see how previous judges have dealt with previous cases (known as "precedents") which have involved similar facts in that branch of the law.
Let us be clear : when a court adjudicates a dispute and hand down a decision, the case is said to constitute a precedent. The decision then becomes a part of the common law and may be followed in other cases.
[...] - Thus one of the major drawbacks of the system is the very wealth of details which it contains. Courts and lawyers alike must take into account an ever-increasing bulk of reported cases of growing complexity, yet it is not unknown for courts to come to a decision without a precedent which would have bound them being brought to their notice ; - The system has also come under fire for the rigidity engendered by the hierarchy of binding precedent, when certain courts lower in the hierarchy have no option but to be bound by previous decisions of higher courts although the latter will patently lead to unwarranted hardship or unfairness, or when a court will hold itself to be bound by a previous decision even when recognizing that the result is far from satisfactory. [...]
[...] I Presentation of the rule of precedent Originality of the system A legal realist, to solve a problem involving the U.S. Constitution or the Uniform Commercial Code, would first search for an appellate judicial decision that interprets the provision in question. This approach is analogous to the one that would be used to solve a common law tort issue. Upon finding a decision, or many decisions made over a number of years, the doctrine of stare decisis (precedent) becomes important. [...]
[...] Every decision handed down by a court of law comprises three basic elements: - A statement of the material facts relied upon by the judge; - the account of process of legal reasoning followed by the judge (including perhaps a review of precedents, illustrations, arguments from analogy) necessarily containing the pronouncements of law (the statements of general legal principles) which form the basis of the decision handed down ; - what is known as the decision inter partes, i.e. the decision in the case in hand stating which party or the action, as, for instance, “judgment for the plaintiff, who is awarded 10,000 $ damages. For the purpose of the doctrine of precedent however, it is part of the decision which contains the vital element. In this part will be found the ratio decidendi, the key proposition of law relevant to the essential facts of the litigation. In short the actual legal reasoning behind the judge's decision. [...]
[...] It will not include other legal arguments or points of law which the court may have considered before arriving at its decision but which are not directly relevant to this decision. These other statements, discussions or comments, which may deal by way of explanation with cases cited or illustrate principles not necessary for the actual decision, or, in the case of a court composed of several judges, be contained in a dissenting judgement, are known as obiter dicta. The obiter dicta are said to have only persuasive authority, i.e. [...]
[...] Second, the high court is expected to follow its own precedents. The high court may avoid a previous holding by determining that the facts in an instant case are sufficiently dissimilar from an earlier case that the precedent may be distinguished. Or the high court may overrule a precedent, since the American judiciary does not follow a rigid view of stare decisis, and justify in its opinion why a new rule is necessary. Third, courts in other jurisdictions may use a precedent as persuasive authority in fashioning a rule for their systems, which among the American states might become a majority or minority rule. [...]
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