It is a fundamental principle of judicial practice of Anglo-Americium legal system that the decision of a court should have binding force on subsequent judicial decisions. It is, however, only the ratio decided (reason for decision) that has the force of saw; obiter dicta (statements of law which go beyond the requirements of the case) “do not even bind the lips that utter them”.
As Salmond observes, the concrete decision is binding between parties to it, but it is the abstract radio decided which alone has the force of law as regards the world at large.
In continental Europe, however, the doctrine of precedent has not been formally established. There a judicial decision per se cannot claim any legal authority, though it may assist a judge in arriving at his conclusion.
Original or Declaratory:
Precedents are either original or declaratory. The former are those which create or establish original or new rules of law, whereas the latter merely reiterate and apply an already existing rule of law. Both are equally a source of law.
Authoritative or Persuasive:
Precedents may also be classed as authoritative, or persuasive. An authoritative precedent is that which must be followed by the judges, whether they approve of it or not. It comes from a court superior to the court concerned.
A persuasive precedent is one which the judges are under no obligation to follow, but which they will take into consideration and attach as much importance as it is necessary. It has, however, no legal claim for recognition. Authoritative precedents are rules of law, while persuasive are historical sources.
Thus a judicial precedent of the Supreme Court of India is authoritative in relation to the High Courts and the other inferior courts in India.
A judicial precedent of the Allahabad High Court is authoritative in relation to other subordinate courts in the Uttar Pradesh. A decision of Calcutta or Bombay High Court in relation to the Allahabad High Court is only persuasive.
Authoritative precedents again are of two kinds: (i) absolute, and (ii) conditional. By absolute we mean the decision is absolutely binding and must be followed without question however erroneous it may appear to be.
Absolute authority exists in three cases in England: (1) Every court is absolutely bound by the decisions of courts superior to itself; (2) The House of Lords is absolutely bound by its own decisions; and (3) The Court of appeal is bound by its own decisions and those of old courts of coordinate authority.