There are two types of precedent

 binding precedents and persuasive precedents. As the names suggest, a binding precedent obliges a

court to follow its decision, while a persuasive precedent can influence or inform a decision but not
compel or restrict it. This system is complex and difficult to understand but it allows the law to function
with consistency while retaining enough flexibility to accommodate change and development. The
effective functioning of precedent requires three things. First, it needs a clear and well-defined court
hierarchy, so the function and status of each court are clear. Second, it needs close adherence to the
principle of stare decisis by judges and magistrates. Third, it requires a thorough system of law
reporting, so that records about other decisions and precedents are available to all judges.

Binding precedent. This type of precedent is called a ‘mandatory precedent’ in some court systems. A
binding precedent requires all inferior courts to follow the ratio decendi of superior courts when the
facts of a case are the same or similar. Note that precedents can only be binding in the same jurisdiction,
such as State court hierarchies. Precedents established in the Federal Court, for example, are not
binding on court hierarchies in any of the States. Within Victoria, the Supreme Court’s Court of Appeal –
being the highest court in that jurisdiction – establishes the greatest number of precedents. These
precedents are binding on the Supreme Court, the County Court, the Magistrates’ Court and the various
specialised courts. Precedents established in the Court of Appeal are not necessarily binding on other
Court of Appeal cases, however, they are generally followed by convention. This means that Court of
Appeal judges can establish a new precedent if they believe there is a pressing reason to do so.

Persuasive precedent. While the decisions of lower courts or courts in other jurisdictions can never be
binding, they can certainly influence the decision of a court. Judges can examine the precedents
established in these courts for guidance and information. They may study the precedent of an inferior
court or a court in another hierarchy (the ratio decendi of a South Australian District Court, for example,
may provide a persuasive precedent for a judge in the County Court of Victoria). Or they may develop a
new precedent that is informed or shaped by these persuasive precedents. There may be no scope for a
persuasive precedent if there is a binding precedent that must be applied. A court can only choose to
follow a persuasive precedent if no relevant binding precedent exists in its own hierarchy.

Obiter dictum. Also worth noting is the possible impact of obiter dictum remarks on the development of
a judgement. Obiter dictum (‘by the way’) statements are made in a judgement but do not constitute
part of the ratio decendi, therefore they are not part of any precedent. Instead, obiter dictum remarks
may provide some insight or explanation into how the judge interpreted the facts and legal principles, in
order to reach his or her decision. They are not binding or persuasive precedents but can provide
important information and guidance for future judges.
Judicial Precedent

There is a term called the doctrine of stare decisis which states that the court’s decision becomes a
precedent to be followed in future cases of a similar nature. The reason why a precedent is recognized is
that the verdict of the judiciary is assumed to be correct. The use of precedents helps the litigant gain
confidence in the judicial system. The administration of the judicial decision becomes just and fair.

General Principle of Doctrine of Judicial Precedent

There are two rules that apply to the doctrine of judicial precedents:

1. The first rule says that a court which is lower in a hierarchy is completely bound by the decisions
of courts which are above it.

2. The second rule states that higher courts are bound by their own decision in general in matters
of related to precedence.

High Court 

 The decisions of the high court are binding on all subordinate courts. In case of a conflict
between two benches of similar authority, the latter decision is to be followed.

 The more the number of judges on a bench, the higher their authority.

 The decision of one high court is not binding on other high courts.

 The Supreme court is the highest authority and its decisions are binding on all other courts.
Article 141 of the constitution says that any law decided by the supreme court shall be binding
on all courts of the country.

Supreme Court

Article 141 states all courts are legally bound to the Supreme Court judicial decisions with the exception
of Supreme Court itself. The Supreme Court is not bound by its own decisions.

However, the Supreme Court recognises that its earlier decisions cannot be deviated from, except in
case of extenuating circumstances.  If an earlier decision is found to be incorrect, the Supreme Court will
deviate from it.
(source – lawgovpol)

Types of Judicial Precedent

1. Declaratory and Original Precedents

As John William Salmon explained, a declaratory precedent is one where there is only application of an
already existing rule in a legal matter.

Whereas, an original precedent is one where a new law is created and applied in a legal matter. Original
precedents are responsible for the creation of new laws.

2. Persuasive Precedents

A persuasive precedent is a type of precedent where the judge is not required to follow the precedent in
a legal matter but will take the precedent heavily into consideration.

So a persuasive precedent is not a direct source of law but is considered a historical source of law. In
India, the decisions of one high court can act as persuasive precedents in other high courts.

3. Absolutely Authoritative Precedents

In an absolutely authoritative precedent, the judges have to compulsorily follow the judicial decision of
the precedent in a case of law.

In other words, even if the judge finds the precedent to be a wrong judgment, he is legally bound to give
the same judicial decision.

For e.g. – Every court in India is absolutely bound by decisions of courts superior to itself because of
hierarchy.
 3. Conditionally Authoritative Precedents

A conditionally authoritative precedent is one where generally the precedent is absolutely authoritative
but in certain special circumstances, like a supreme court decision, it can be disregarded. The court can
disregard the decision if it is a wrong decision, or goes against the law and reason.

A question of fact is a question as to what "happened" in a given legal matter:

 Was the defendant present at the scene of the crime? 

 Were the fingerprints lifted from the weapon untainted and belonged to the
defendant? 
 Did the defendant act in response to a reasonable belief that their life was in
danger by the victim of the crime?
 Did the signature on the contract match the plaintiff's other signatures?

A question of law is generally more of a procedural question:

 Are there sufficient facts alleged by the plaintiff to support their case?
 Were the defendant's Constitutional rights violated when the police searched
his house without a warrant? 
 Is the copy of the contract that the defendants want to admit an authentic
copy of the contract? 
 Is the witness that the plaintiff wants to present actually an expert in their
field?