Overruling occurs when a court overturns – abolishes – a rule established in a binding precedent. Overruling may be explicit or implicit. Explicit overruling occurs when a court explicitly abolishes a rule established by precedents in its jurisdiction and replaces it with the opposite rule. If a rule established in a precedent qualifies for overruling, normally a court will explicitly overrule it. In some cases, however, instead of explicitly overruling the rule, a court implicitly overrules it by the process of transformation, in which a court purports to follow a rule while actually undoing it.

Overruling is guided by a principle that is implicit in the case law. Under this principle a common law rule should be overruled if it is substantially incongruent with social morality, social policy, and experience; if it is inconsistent with other, sound rules; if it has been riddled with inconsistent distinctions; or if it is manifestly inequitable and unjust; and if the value of overruling the rule in question exceeds the value of retaining it.

Reasoning by analogy may be rule-based or fact-based. Rule-based analogical reasoning involves two steps. The first step is to identify an existing rule that is proposed to be applied to the case to be decided because it is analogous to that case – the given rule. The second step is to determine whether as a matter of social propositions the given rule cannot be distinguished from the case to be decided and therefore should be applied to that case by analogy. Common law courts seldom reason by analogy because a court would never reason by analogy if the case before it is governed by a rule and the common law is thick with rules. Rule-based analogy is a weak form of legal reasoning because often a court must pick from competing analogies so that rule-based analogical reasoning is unpredictable. Fact-based analogical reasoning is based on a factual similarity between the case to be decided and a prior case that is proposed as an analogy. It is weak for the same reason.

There are many schools of formal logic, but in law the term logic is used informally to mean sound reasoning. So when we say that a judicial opinion is logical we mean that is internally consistent and makes sense. Deduction is major expression of logical thinking. Formal deduction takes the form of a syllogism consisting of a general statement, known as the major premise, a specific statement, known as the minor premise, and a conclusion that necessarily follows from the premises. All or most common law cases involve implicit informal deductive reasoning, as in “If an offeree rejects an offer her power of acceptance is terminated. The offeree rejected the offer. Therefore her power of acceptance was terminated.” However, few common law cases involve explicit formal syllogistic reasoning. Judgment is pervasive in legal reasoning, but the role of good judgment is frequently overlooked, partly because it cannot be taught and is difficult to acquire. It is a quality, like grace, that some have and some don’t. It differs from intelligence. A judge can be very intelligent but lack good judgment. Great judges have the quality of great judgment.

The foundation of most rule-based reasoning is the principle of stare decisis, meaning to stand by things decided. Under this principle, when a court decides a case that falls within a rule established in a precedent decided by a superior court or the deciding court, the court must apply that rule, subject to the limits of the principle. The best justification of stare decisis is that complex societies need a great amount of law to facilitate private planning, shape private conduct, and facilitate the settlement of private disputes. Because American legislatures do not have the capacity or ability to enact more than a limited number of private law rules, private law falls largely to the courts. Without the principle of stare decisis, rules adopted in judicial opinions would not be binding and there would be no common law.

There are several limitations on the principle of stare decisis. The most important is that in most areas of the common law if a rule established by precedent is not even substantially congruent with social morality, social policy, and experience, it may be overruled.

The common law largely consists of rules established in precedents. The rule established in a precedent is the rule that the precedent court stated governed or decided the case before it. That rule is the holding of the precedent. Most statements in judicial opinions are either factual or legal. Factual statements consist of the facts and history of the case. The central legal statement is the holding. Most other legal statements in an opinion are dicta – singular, dictum. Dictum means something said. The holding of a case is binding on lower courts and the deciding court. Dicta are not binding: they concern rules but are not rules. Typically, dicta signal a court’s possible future actions. For example, a dictum may be a rule that the court suggests would be desirable although it is not presently being adopted; a statement of where it would be desirable for the law to go; or a criticism of an established rule that does not rise to the level of undoing the rule. Although dicta are not binding, they can have legal import. For example, they may be employed by a court to foreshadow future changes in the law.

A court faced with a binding precedent that governs the case before it must apply the precedent, overrule it, hive off a new rule from the rule established by the precedent, create an exception to the rule, or distinguish the precedent. In hiving off, a new legal rule is carved out of an established rule to govern a subject that prior to the hiving-off fell within the established rule. The new rule then lives alongside the established rule. Exceptions differ in a fundamental way from hived-off rules. Hived-off rules are free-standing. In contrast, exceptions have no meaning except in the context of the rule from which they are an exception. Distinguishing may be fact-based or rule-based. In fact-based distinguishing the deciding court concludes that a precedent should not be applied to the case before it because of a difference between the facts of the two cases. In rule-based distinguishing the deciding court concludes that a precedent that plausibly applies to the case before it does not actually do so in fact.

Legal reasoning in the common law is based on rules adopted in binding legal precedents or authoritative although not binding rules. Some commentators claim that legal reasoning is analogy-based rather than rule-based, but a simple reading of common law cases makes it evident that common law courts seldom reason by analogy. Furthermore, in an experiment in which eighty-four common law cases were selected at random, only three reasoned by analogy. The answer as to why common law courts seldom reason by analogy is simple: a court would never reason by analogy if a case is governed by a rule, and the common law is thick with rules. Some other commentators claim that legal reasoning is based on a similarity. This claim is also incorrect, partly for the same reason and partly because if a prior case is identical to the case to be decided it will almost certainly have laid down a rule that governs that case, and if a prior case is only loosely similar to a case to be decided a court would normally adopt a new rule, because in that case it would need to make its reasoning clear.

The term hypothetical means facts that are assumed rather than actual. The term a hypothetical means a scenario composed of such facts. Reasoning from hypotheticals takes two forms. In one form, a hypothetical is employed to view a case in a broader perspective to help decide the case. Hypotheticals in this form have three characteristics. First, the hypothetical differs from the case in its particulars, but as a matter of social morality, social policy, and experience the hypothetical is comparable to the case in its basic structure. Second, intuitively the hypothetical is easier to decide than the case. Third, because the hypothetical and the case are comparable as a matter of social propositions, the hypothetical and the case cannot be justifiably distinguished. That being so, the result in the case should be the same as the result in the hypothetical. In the second form of reasoning from hypotheticals, a hypothetical is employed to show that a case should not be decided in a certain way because if the case were decided that way, hypothetical similar cases would have to be decided the same way and deciding those cases the same way would be unsound.

The common law is based on doctrinal and social propositions. Doctrinal propositions purport to state legal rules that the legal profession regards as legal doctrine. Social propositions are propositions of social morality, social policy, and empirical propositions. The two types of propositions do different work. Doctrinal propositions are legal rules; social propositions are the reasons for legal rules. A common law rule is justified only if it is supported by social propositions. The kind of morality that is relevant to legal reasoning is social or conventional morality, that is, moral norms that are rooted in aspirations for the community as a whole and that have substantial support in the community. When policy is relevant to legal reasoning, the kinds of policies that are relevant are social policies – policies that have substantial support in the community or about which there is reason to conclude that they would be conducive to public welfare.

The common law consists of legal rules, principles, and standards. Common law legal rules are relatively specific legal norms that require actors to act or not act in a specified way, enable or disable specified types of arrangement, or set remedies for specific wrongs. In contrast, legal principles are relatively general legal norms. Because of their generality, legal principles can generate, explain, and justify legal rules, while, because of their specificity, legal rules normally cannot generate, explain, or justify either legal principles or other legal rules. And because of their specificity, most legal rules can determine cases with little or no elaboration. In contrast, most legal principles must be elaborated to determine cases. As used in the common law, the term standard has three different meanings: it may be used as a collective noun that includes all legal norms; it may be used to mean extremely general legal norms; or it may refer to legal rules that are not applicable at the time they are adopted because they are designed to be further elaborated, usually by administrative agencies.

The most prominent type of rules employed in American legal reasoning consists of rules established in binding legal precedents. The next most prominent type consists of authoritative although not legally binding rules. An authoritative although not legally binding rule is one that courts treat as a rule not because after due consideration they regard it as a good rule but because it was adopted in a source to which the courts give deference. In the common law there are several sources of authoritative although not legally binding rules. One source consists of decisions by the Supreme Courts of other jurisdictions. Another source consists of cases decided by coordinate courts in the same jurisdiction as the deciding court. Perhaps the most important sources of authoritative although not legally binding rules are Restatements and leading treatises.

Legal rules are either canonical or malleable. A canonical rule is fixed: it may not be expressed in different ways, may not evolve, and may not be subject to exceptions. Statutes are the paradigm form of canonical legal rules. In contrast, a malleable rule can be expressed in different ways, can evolve, and can be made subject to exceptions. Common law rules are the paradigm form of malleable rules. Legal rules have a core and a penumbra. A common law rule can be articulated through more than one expression of the core of the rule, through evolution of the meaning of the core, or through modification of the rule’s penumbra. In each case the core remains, albeit in somewhat different forms. As Benjamin Cardozo said, “The rules and principles of case law have never been treated as final truths but as working hypotheses, continually retested in those great laboratories of law, the courts of justice.”

Law can be divided into sets of binary categories. One such set consists of public law, which concerns such matters as the powers of governmental institutions, on the one hand, and private law, which concerns such matters as the relationships between private persons, on the other. Another set consists of civil law and common law. In civil law systems, which prevail in Europe, Latin America, and most of Asia, public law is largely found in statutes, while private law is largely found in civil codes. In common law systems, which prevail in England and former English colonies, in particular the United States, private law is largely made by courts, in the form of rules adopted in judicial decisions. American private law is largely made by courts because complex societies need a great deal of private law to facilitate private planning, shape private conduct, and facilitate the settlement of private disputes, and the capacity and ability of American legislatures to make private law is limited. As a result, American courts have two functions: resolving disputes and making law.