An opinion has predictive value only when another court is bound to follow it. At the state level, this means that the opinion of a state Supreme Court binds all courts lower in the judicial hierarchy of the state, thus binding any intermediate appellate court and all trial courts. A trial court decision, at the other end of that hierarchy, is not binding outside the county or municipality in which the court sits, although it may be persuasive authority.
The root idea is that of providing equality for persons in similar situations. Deciding who is in a similar situation—not an identical situation (that almost never happens)—involves analysis of a reported case. Appellate or reported cases may be distinguished—i.e., read narrowly to avoid their applications—or applied—i.e., read for similarities.
Distinguishing case precedent is often necessary because courts have no control over who brings a case to court. In formulating and enacting a regulation or a statute, a legislature or an administrative agency might consider all the possible or predictable situations to which its work product might apply and draft a regulation or statute encompassing them; a court has no such opportunity. If a judge in an opinion writes more generally about the law than the facts of the case require, that part of the opinion will be considered obiter dictum—Latin for a statement “made in passing”—or dicta. Dicta may be included to explain a decision, or to limit its applicability to the facts found at trial—particularly when the facts were contested at trial. While not binding as legal precedent, dicta may be a persuasive authority even so.
Lots of cases, with lots of rules, may eventually form a body of law encompassing most aspects of a subject (some attorneys refer to rules synthesized from many cases as legal doctrine—but such terms of art have various and variable meanings). From many cases, a synthesis of the law may emerge. Producing this synthesis is a form of inductive reasoning—deriving a general rule from the individual cases. The generalization takes place using the materials the judge finds at hand—case(s), statute(s), and secondary authorities. If necessary (nothing else being available), even one case might be generalized for use in an opinion in another case.
Application of a case to another situation is a process of making analogies between the case and the situation at hand. It is often arranged in an opinion as a syllogism, a form of deductive reasoning, as in the following:
(1) Possession of land is necessary to bring an action of trespass.
(2) Alex has possession of land.
(3) Alex may bring an action of trespass.
Here the first proposition (1) is a major or general premise or rule, (2) is a minor or factual premise, and (3) is a conclusion, permitting a general rule to be applied to a particular situation.