Definition of Precedent
A precedent is a legal case which establishes a standard for how other cases which follow should be handled. Precedents can be binding, which means they should be followed by other courts in most situations, or persuasive, which means they can be followed but are not mandatory. The concept of precedence in law comes from English common law.
Legal precedent is created as the law is interpreted by judges as they make rulings on cases. This type of common law, which is made and interpreted by judges, differs from statutory law which is created by the legislature (both state and federal).
Our court system in the U.S. has historically relied on the doctrine of stare decisis or "to stand by and adhere to decisions and not disturb what is settled" which means that future court cases should follow the decisions which have been established through legal precedent. This applies specifically to courts which are within the same jurisdiction.