Summary
- A legal precedent is a past court decision that binds later cases on the same point of law, under the principle of stare decisis.
- Whether a precedent binds depends on the court hierarchy: decisions of higher courts bind lower courts, so the Supreme Court binds the Court of Appeal, which binds the High Court and County Court.
- Only the ratio decidendi, the reasoning behind a decision, is binding. Other remarks, called obiter dicta, are persuasive but not binding, and courts can sometimes distinguish a case on its facts.
- This guide explains the role of legal precedent in court decisions for business owners in England and Wales.
- LegalVision’s business lawyers specialise in advising clients on commercial disputes and litigation.
Tips for Businesses
Before litigating, ask your lawyer to check whether a binding precedent helps or harms your position, as it can decide the outcome. Identify which court’s decisions bind your case under the hierarchy. Remember only the ratio of a case binds, so a similar case may sometimes be distinguished on its facts.
A legal precedent is a court decision that binds later cases on the same point of law. The principle is known as stare decisis, Latin for “to stand by things decided”, and it gives the legal system consistency and predictability. In England and Wales, whether a precedent binds you depends on the court hierarchy. Decisions of higher courts bind lower ones, so a Supreme Court ruling binds the Court of Appeal, which binds the High Court and County Court. The binding part of a judgment is the ratio decidendi, the legal reasoning behind the decision. Other comments, called obiter dicta, are persuasive but not binding. For your commercial dispute, whether your case aligns with an existing precedent can strongly influence the outcome. 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.
Ratio Decidendi and Obiter Dicta
Not every word of a judgment carries the same legal weight. Understanding which part binds future cases helps you see how a precedent might apply to your dispute.
The ratio decidendi is the legal reasoning essential to the decision. It is the part that binds lower courts in later cases on the same point of law. When lawyers talk about what a case “decided”, they usually mean its ratio.
Obiter dicta are comments made “by the way”. A judge might remark on how the law would apply in a different situation, or give a view that was not necessary to decide the case. These remarks are persuasive but not binding. A later court may choose to follow them, but does not have to.
This distinction matters in practice. A case that appears to go against you may turn on facts different from yours, allowing your lawyer to distinguish it. Equally, a helpful comment in an earlier judgment may only be obiter, so it carries less weight than it first appears.
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
What does stare decisis mean?
Stare decisis is Latin for “to stand by things decided”. It is the principle that courts follow previous decisions on the same point of law. This gives the legal system consistency and predictability, so similar cases are generally decided in similar ways.
What is the difference between ratio decidendi and obiter dicta?
The ratio decidendi is the legal reasoning essential to a decision, and it binds lower courts in later cases. Obiter dicta are remarks made “by the way” that were not essential to the decision. Obiter comments are persuasive but not binding on future courts.
What is the difference between binding and persuasive precedent?
A binding precedent must be followed, usually because it comes from a higher court on the same point of law. A persuasive precedent may be considered and followed, but does not have to be. Decisions of lower courts, other jurisdictions, or obiter comments are persuasive only.
Can a court ever depart from precedent?
Yes. Since the Practice Statement of 1966, the Supreme Court can depart from its own previous decisions where it appears right to do so, though it does this rarely. The Court of Appeal can also depart in limited circumstances established in Young v Bristol Aeroplane Co.
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