How is "legal precedent" best defined?

Legal precedent is best defined as a previous court decision that guides future cases. This concept is fundamental in the legal system, particularly in common law jurisdictions, where the principle of stare decisis applies. Stare decisis means that courts are obliged to respect the precedents set by previous rulings. This connection creates consistency and predictability within the law, as later cases are decided based on the interpretations and rulings established in earlier cases. Consequently, legal precedents help shape the evolution of the law by ensuring that similar cases are treated similarly, thereby promoting fairness and stability in legal adjudication.

The other options do not align with the definition of legal precedent. A new law passed by Congress refers to statutory law rather than judicial precedents. A contract that sets legal standards pertains to specific agreements between parties, which does not fit the concept of guiding future cases. Guidelines for business ethics provide moral direction for conduct in the business environment but are separate from the legal obligations established by court rulings. Therefore, the selected definition encapsulates the true essence of what a legal precedent represents in the judicial system.