The definition of the doctrine of precedent is lower courts are bound by the decisions of higher courts within the same judicial hierarchy if the facts are similar. For example, in south Australian there are three tiered or layered court system. The lower layer is Magistrate court; the Middle layer is District court and the upper layer is the Supreme Court. The highest court is the high court of Australia. So if a decision made by the Supreme Court, the Magistrate court has to follow. Moreover, the Doctrine of precedent consists of binding precedent and persuasive precedent. Binding precedent mean is that lower courts must follow higher court’s decisions when the fact is similar. Persuasive precedent means is that if decision is made by a different judicial hierarchy, lower courts do not have to follow the decision, but encourage following it.
The definition of the Ratio Decidendi is that in case the reason for decision is Ratio Decidendi when lower courts follow higher court’s decisions the lower courts only required to follow the legal principle given in the Ratio Decidendi. The definition of the Obiter Dicta is that judges’ observations with a case, but not reason for decisions. Therefore, Obiter is not a legal principle for the particular case but if the obiter is made by an eminent judge in a higher court, usually lower court judges refer to them in later case. So the most differences between the Ratio Decidendi and the Obiter Dicta is the Obiter Dicta is not necessary for final decision but can provide an indication of how the court arrived at its final decision. The most obvious example that can show the differences between the Ratio Decidendi and the Obiter Dicta is Donoghue V Stevenson  AC 562. Because in this case the ratio in Donoghue V Stevenson is the proposition that a manufacturer owes a duty of care to the consumer to ensure that manufactured goods have not defects that are likely to cause injury. However,...