Fundamentals Level -Skills Module， Paper F4 (GLO)
Corporate and Business Law (Global) June 2009 Answers
In relation to aspect of business law the default law and cases refer to the United Kingdom， however relevant law from other jurisdictions will be credited where appropriate.
1 This question requires candidates to explain the way in which the doctrine of precedent operates within two of three legal systems， although it is recognised that the doctrine is essentially an aspect of Common Law systems.
(a) Precedent in the English Common Law
The doctrine of binding precedent， or stare decisis， lies at the heart of the English legal system. The doctrine refers to the fact that within the hierarchical structure of the English courts， a decision of a higher court will be binding on a court lower than it in that hierarchy. When judges try cases they will check to see if a similar situation has come before a court previously. If the precedent was set by a court of equal or higher status to the court deciding the new case then the judge in the present case should normally follow the rule of law established in the earlier case.
It is important to establish that it is not the actual decision in a case that sets the precedent; that is set by the rule of law on which the decision is founded. This rule， which is an abstraction from the facts of the case， is known as the ratio decidendi of the case.
Any statement of law that is not an essential part of the ratio decidendi is， strictly speaking， superfluous; and any such statement is referred to as obiter dictum， i.e. said by the way. Although obiter dicta statements do not form part of the binding precedent they are persuasive authority and can be taken into consideration in later cases.
There are numerous perceived advantages of the doctrine of stare decisis; amongst which are：
(i) Time saving. This refers to the fact that it saves the time of the judiciary， lawyers and their clients for the reason that cases do not have to be re-argued. In respect of potential litigants it saves them money in court expenses because they can apply to their solicitor/barrister for guidance as to how their particular case is likely to be decided in the light of previous cases on the same or similar points.
(ii) Certainty. Once the legal rule has been established in one case， individuals can act with regard to that rule relatively secure in the knowledge that it will not be changed by some later court.
(iii) Flexibility. This refers to the fact that the various mechanisms by means of which the judges can manipulate the common law provides them with an opportunity to develop law in particular areas without waiting for Parliament to enact legislation.
The main mechanisms through which judges alter or avoid precedents are：
(i) Overruling， which is the procedure whereby a court higher up in the hierarchy sets aside a legal ruling established in a previous case.
(ii) Distinguishing， on the other hand， occurs when a later court regards the facts of the case before it as significantly different from the facts of a cited precedent. Consequently it will not be bound to follow that precedent. Judges use the device of distinguishing where， for some reason， they are unwilling to follow a particular precedent.
Disadvantages of Case Law
(i) Uncertainty. This refers to the fact that the degree of certainty provided by the doctrine of stare decisis is undermined by the absolute number of cases that have been reported and can be cited as authorities. This uncertainty is increased by the ability of the judiciary to select which authority to follow through use of the mechanism of distinguishing cases on their facts.
