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Yes, it is the role of the courts to interpret and apply the law. Judges apply the law to the case which is before them: they determine how the law applies to the lawsuit at hand. This means, given the particular facts involved in a dispute, a judge decides how the application of law affects the outcome sought by the parties involved. This is complex, because:

A. What are "the facts"? Factual issues are decided by a jury [unless a jury is waived by the parties, generally speaking]. Evidence is presented in court (a process governed by legal rules, which are rational principles), then a jury weighs the evidence to determine "the facts" -- this affects, and often determines, the outcome. Examples: "Did she sign the document?"; "Did he enter the building intending to commit a crime?" Juries weigh the evidence to decide, with different standards depending on whether it is a civil ("by a preponderance of the evidence" [more likely than not]) or a criminal ("beyond a reasonable doubt") proceeding.

B. What is "the law"? This is not an easy question. This is decided by the judge. The law depends on the jurisdiction a dispute is in, and jurisdictions can overlap (the same situation might be subject to state law and federal law). The law, rather, the laws to be applied are either statutes enacted by a legislature, or come from the "common law", which are principles derived from precedent cases. Once a particular situation is adjudicated in court, it is (again, generally speaking) not revisited, and the ruling of that case becomes precedent for future cases. However, typically, no two situations are exactly the same; and lawyers for one side or the other argue that his client's dispute either is or isn't like various precedents. How something -- a dispute -- is viewed affects the law to be applied to it, and the outcome.

C. Typically, once factual issues are decided, that's that -- meaning one is stuck with them on appeal. When one appeals, that party is basically saying that the legal issues involved were decided incorrectly; he is appealing the judge's ruling, because the judge applied the law erroneously, or not.

That's the nutshell version. Reality is a messy thing to adjudicate!

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