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As a business owner, it is possible that you could find yourself part of court proceedings at some stage. This could be, for example, because the other party in a commercial contract has not fulfilled their obligations. While court litigation should be a final resort to resolving a business dispute, there are rules and legal principles you must understand if you choose to undertake this option. One significant rule is binding precedent which may apply where your case is similar to a case decided previously by the court. This article will explain legal precedent and its role in a judge’s decisions.
What is a Legal Precedent?
A legal precedent is where a court has decided on a case, which is then considered binding on court cases of a similar nature. Generally, a binding precedent will arise where the:
- court making the original decision was either equal or higher in rank to the currently deciding court; and
- decision concerns the same point of law.
This means that lower court decisions do not bind decisions in superior courts.
Why is Legal Precedent Important for My Commercial Court Case?
Legal precedent is significant to any commercial court litigation, as it can be highly influential on the decisions made in your case. In other words, losing or winning in court may depend on whether your case aligns with the legal principles the precedent outlines. Although it is an essential concept to understand, navigating legal precedent can be confusing. Therefore, it is essential to obtain advice from a knowledgeable litigation lawyer when you are involved in commercial litigation. Their expertise and experience with legal precedent will allow them to advise you accordingly.
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How Does Legal Precedent Apply?
When you take a commercial case to court, this is classed as civil litigation. There is a hierarchy of courts in civil litigation, which beginning with the highest, are as follows:
- Supreme Court;
- Court of Appeal;
- High Court, and
- County Court.
Therefore, some examples of how legal precedent applies are:
- the decision of the Supreme Court binds the Court of Appeal;
- the Court of Appeal is bound by previous decisions of the Court of Appeal and
- decisions of the Court of Appeal do not bind the Supreme Court.
However, you should note that the doctrine of legal precedent is not always straightforward, and other rules may affect it. We discuss some below in the context of different courts.
The Supreme Court
Historically, the Supreme Court has followed the doctrine of legal precedent, deciding a given court case based on legal principles established in a previous, similar one. However, in 1966, the Practice Statement 1966 allowed for an exception to this rule. It details that although these decisions are usually binding, the court may, if necessary, make an exception. This may be in circumstances where following precedent could, for example, cause injustice. Nonetheless, the Supreme Court has not used these exceptions liberally. Instead, the court rarely treats a decision as not legally binding on a subsequent case.
The Court of Appeal
The Court of Appeal is bound by its previous decisions on the same legal issues in subsequent cases. However, there are three exceptions to this, which evolved from the case of Young v Bristol Aeroplane Co in the 1940s. These are:
- Where a previous decision by the Court of Appeal was changed by a decision made on the same point by the Supreme Court.
- Where two decisions of the Court of Appeal on the point in question were different, meaning the Court can decide which is binding.
- When a previous Court of Appeal decision is made incorrectly, such as when it does not consider a relevant legal issue, rule or principle that it should have.
Court of the First Instance
A court of the first instance is either the High Court or the County Court, the two lower courts in the civil court hierarchy. It is essential to understand that decisions of the High Court bind the County Court, as the High Court is higher than it. However, these two courts are different to the superior courts in that the judges do not legally need to make the same decision as one made previously by the court. Still, the judges will typically follow a decision on the same point of law to maintain consistency.
This fact sheet outlines how your business can manage a dispute.
Key Takeaways
Legal precedent, or the doctrine of precedent, is a hugely important aspect of the legal system. It concerns courts being bound by previous decisions on the same point of law. Legal precedent can have a significant effect on the outcome of your commercial litigation. As a result, you should be aware of:
- the hierarchy of the civil courts;
- how legal precedent applies under this hierarchy; and
- any exceptions to legal precedent each court can consider.
If you need help with understanding how a precedent case applies to your commercial dispute, LegalVision’s experienced disputes and litigation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
If you end up litigating your commercial dispute, legal precedent will become highly influential to your case’s success. This is because judges rely on precedent to apply relevant legal principles, ultimately making a decision based on them.
The highest court in the UK is the Supreme Court, which is followed by the Court of Appeal and then the High Court. Lastly, the County Court is the lowest court.
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