Declaratory Judgment – Definition

Cite this article as:"Declaratory Judgment – Definition," in The Business Professor, updated July 30, 2019, last accessed December 4, 2020,

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Declaratory Judgment Definition

In a contract, a court judgement that determines the rights of each party as well as their obligations in the contract. When parties that are involved in a contract are uncertain about what their rights and obligations are, they resort to a legal counsel. A declaratory judgment is the resolution of the court stating what the legal rights and obligations of parties in a contract are. Declaratory judgments are legally binding on parties involved in the contract.

A Little More on What is Declaratory Judgment

In a contract, any of the counterparties may seek the counsel of the court if there are controversies on what their rights and obligations are, especially in legal aspects. A judgement of the court that provides clarification and settlement on legal matters in the contract is a declaratory judgment.

However, the court does not abruptly intervene or outline the rights and obligations of parties in the contract. A petition must be filed by any of the parties. A court does not award any damage with declaratory judgment. If an individual however gets an unpalatable declaratory judgment, he can file a lawsuit but there is a high tendency that it can be dismissed.

A Declaratory Judgment Example

The coverage of a policy and the rights and obligations of policyholders in the coverage are determined by a court-issued judgment called a declaratory judgment. The purpose for which a contract is set and the responsibility of each of the parties is outlined by a declaratory judgment.  For instance, an insurer in a coverage can seek a declaratory judgment, if peradventure a policyholder wants to file a lawsuit against the insurer to recover losses. A declaratory judgement helps the insurer and the insured to clarify the rights and obligations in the contract, for example, if a court-issued  judgement outlines that the insurer is not liable for the specific loss the insured is requiring, the insured (policyholder) has no option than to drop the lawsuit.

Reference for “Declaratory Judgment”

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