Laws have been adopted that give both state and federal courts the power to declare or define the legal rights, duties, obligations, or status of the parties involved in a dispute. In a suit for only a declaratory judgment, the court does not award any damages and does not order either party to do anything.

Interpretation of a Law, a Contract, or a Deed

Declaratory judgment suits are sometimes filed to obtain an interpretation of a law, a contract, or a deed. A party to a contract might ask the court to interpret the contract and declare the rights of the parties. For example, an insurance company might file a declaratory judgment suit asking the court to decide if the insured's claim is covered by a policy of the insurance company. An insurance company might also ask the court to decide if the company has an obligation to defend an insured named in a lawsuit. A company might ask the court to decide if a new tax applies to it before the company pays the tax. A person claiming an interest in land might ask the court to interpret the deed to determine if the person truly has a right to the land.

Effect of Declaratory Judgment

The court's declaration of the parties' rights or its interpretation of a law, contract, or deed is binding on the parties in the dispute. The decision to grant or deny declaratory relief can be appealed to a higher court.

Copyright 2010 LexisNexis, a division of Reed Elsevier Inc.