I believe the legislative branch creates statutory law and the judicial branch, through its interpretation of the statutes, creates case law.  I don't think it would be practical for the legislature to try to create statutes for every possible scenario, so the court system applies the law on a case by case basis.  To keep things uniform and fair, the higher courts set precedents for the lower courts.

Since most cases don't fit perfectly into the various laws and previous cases, the litigation process allows for the parties to argue how the law should be applied to their situation.  All in all, it seems like a good system to me.  Just make sure you have the better attorney.  

Kevin, please feel free to correct me if my interpretation is wrong.

Thanks,
Robert A. Franco
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