The Virginia Business Litigation Blog
Contracts require both mutuality of assent and consideration to be enforceable. Legally sufficient consideration consists of bargained-for promises and obligations. If the consideration for the promise of one party is the promise of the other party, “there must be absolute mutuality of engagement, so that each party has the right to hold the other to a positive agreement. Both parties must be bound, or neither is bound.” (Am. Agric. Chem. Co. v. Kennedy & Crawford, 48 S.E. 868, 870 (Va. 1904)). A contract consisting solely of illusory promises will be deemed to lack consideration and will therefore not be enforceable. An illusory promise is one that—upon closer inspection—is not really a promise at all. An illusory promise leaves one party with complete discretion as to whether to perform the promise or abandon it. If the promise can be ignored at the will of the party, the promise has no value and will render the contract unenforceable.
Truist Bank learned this when the Western District of Virginia refused to enforce a boilerplate arbitration clause in a contract with one of its customers. In Kiser v. Truist Financial Corporation, the court denied Truist’s motion to compel arbitration, concluding that even if an arbitration agreement existed, it was illusory and therefore unenforceable.
The plaintiffs, Tarah and Ronald Kiser, sued Truist, alleging that Truist forged their signatures on certain banking documents and inserted false information into various account-related forms. Truist moved to compel arbitration based on clauses found in various versions of its “Rules and Regulations for Deposit Accounts” that governed the plaintiffs’ banking relationships. The arbitration clause appeared in multiple iterations of the account agreement since 2006. Notably, these agreements gave Truist the unilateral right to amend the terms and conditions, including the arbitration provision, with or without notice to the Kisers. One agreement read, 
“Unless otherwise prohibited or required by applicable law or regulation, the Bank may change from time to time other provisions of these rules and regulations with or without notice.”
After concluding that the Kisers had agreed to the arbitration language, the court held that the clause was illusory and therefore unenforceable. The key factor was Truist’s “unfettered unilateral modification power”—the power to unilaterally amend the arbitration provision without providing advance notice to the account holders.
The court noted that Truist’s account agreements lacked clear limitations on its power to modify or terminate the arbitration agreement. While some versions required notice only if “required by law,” the agreements generally did not prohibit retroactive changes, nor did they require meaningful notice or consent from the customer. The court pointed out that if it was the customer who sought to invoke the arbitration clause and compel arbitration, Truist was free to unilaterally delete the clause if it no longer wished to arbitrate the particular dispute. In short, Truist had reserved the power to change the rules at any time, potentially even after a dispute had arisen.
This unilateral modification power rendered the arbitration clause illusory under Virginia contract law. The court reasoned that if one party can change the arbitration provision at will and without notice, there is no binding mutual obligation. A party cannot be compelled to arbitrate under an agreement that the other party is free to rewrite or discard.
“In essence,” the court wrote, “Truist never agreed to be bound by anything. Truist retained the ability to hold the Kisers to their promises while also reserving for itself a unilateral escape hatch to activate whenever it sees fit.”