READ CHAPTER 5 ON THE TOPIC OF JUDICIAL DECISIONS AND DEFINE THE TERM BELOW WITH CLEAR

EXAMPLE.

A) STARE DECISIS

Stare decisis is a legal doctrine that obligates courts to follow historical cases when
making a ruling on a similar case. Stare decisis ensures that cases with similar
scenarios and facts are approached in the same way. Simply put, it binds courts to
follow legal precedents set by previous decisions.

Example of Stare Decisis

Insider trading in the securities industry is the misuse of material non-public

information for financial gain. The insider can trade the information for his portfolio
or sell the information to an outsider for a cost. The precedent looked to by courts
when dealing with insider trading is the 1983 case of Dirks v. SEC. In this case, the
U.S. Supreme Court ruled that insiders are guilty if they directly or indirectly received
material benefits from disclosing the information to someone who acts on it. In
addition, exploiting confidential information exists when the information is gifted to a
relative or friend. This decision became precedent and is upheld by courts dealing
with financial crimes that are similar in nature.

B) OBITER DICTUM

Obiter dictum (plural obiter dicta) is an opinion or a remark made by a judge which
does not form a necessary part of the court's decision. The word obiter dicta is a Latin
word which means “things said by the way.” Obiter dicta can be passing comments,
opinions or examples provided by a judge. Statements constituting obiter dicta are
therefore not binding. For example, if a court dismisses a case due to lack of
jurisdiction and offers opinions on merits of a case, then these opinions constitutes
obiter dicta.

Example of Obiter Dictum

Julia, who purchased an Acme washer and dryer set, was disappointed when only a
month later the washing machine stopped working. Having been told that the
appliance had a one-year warranty against manufacturer defects, she attempted to
make a claim to have her washing machine repaired or replaced.

The Acme company denied her claim, saying that she had not responded with a
message saying she had accepted the company’s terms and conditions for warranty
service, and she was therefore not eligible. Julia filed a civil lawsuit in her attempt to
hold the company responsible to fulfill the warranty.
 In the court’s decision, which was rendered in favor of Julia, the court explains:

“If I lost my dog, and advertised that I would pay $1,000 to anyone who brought the
dog to my home, could I deny the reward to the neighbor who found and returned
him, on the basis that he hadn’t written to me formally accepting my offer? Of course
not.”

This case is about a defective appliance, and its warranty, not a dog. The court’s
analogy is obiter dicta, as it is not crucial to the court’s ruling, but given only by way
of explanation. If the dog analogy had been left out, the court’s ruling would be
exactly the same.

C) RATIO DECIDENDI

Ratio decidendi ‘the rule in a decision’. This is a crucial part of the understanding of
the way in which the common law works. Once a system has been adopted of binding
PRECEDENT, it has to be discovered what it is in the previous decision that binds the
court later in time. While it is sometimes possible to peruse the opinion of the judge to
find the rule, this is not by any means a reliable way of discovering the rule in the
case. The soundest general method is to discover the material facts of the case,
determine what the decision was and then to draw the proposition that most closely
marries the material facts to the actual decision. It is difficult enough to do this with a
single opinion but very much harder with multiple opinions such as come from the
Court of Appeal, the Inner House and the House of Lords. Sometimes it is said to be
impossible to form a ratio of general application.

Example of Ratio Decidendi

An example of ratio decidendi is the case of Donoghue v. Stevenson (1932),

otherwise known as the “snail in the bottle case.” This case is a good ratio decidendi
example because it explores the idea that a person can owe a duty of care to another
person whom he can reasonably foresee will suffer effects as the result of his actions.

While the matter did not occur in the U.S., this case is a fundamental Western case
because it essentially created the civil tort of negligence. It also implemented the idea
that businesses owe a duty of care to their customers and should fulfill that duty or
risk a lawsuit.