Declaratory Judgment - Explained
What is a Declaratory Judgment?
Written by Jason Gordon
Updated at September 23rd, 2021
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What is a Declaratory Judgment?
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.
How Does a Declaratory Judgment Work?
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.
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