Cheek v. United Healthcare

Brief Fact Summary.

United Healthcare filed a motion to compel a suit to arbitration after Cheek sued in court despite signing an arbitration agreement.

Synopsis of Rule of Law.

An illusory promise does not create the consideration necessary to enforce a binding agreement.

Facts.

United Healthcare (United) made Cheek an oral offer of employment, written by a written offer of employment the same day. The written offer of employment included an arbitration policy and Cheek accepted the offer. On Cheek’s first day of work, Cheek was given an employee handbook with a summary of the arbitration agreement and Cheek signed a form acknowledging the arbitration agreement. When Cheek was terminated seven months later, Cheek sued in court and the matter was compelled to arbitration. Cheek appealed.

Issue.

Whether an illusory promise creates the consideration necessary to enforce a binding agreement?

Held.

No. The judgment of the trial court is reversed. There is no consideration for the arbitration agreement because the arbitration agreement is an illusory promise. The arbitration agreement permits United to alter or revoke the agreement if the agreement was unfavorable, making no promise to Cheek.

Discussion.

An illusory promise does not create the consideration necessary to enforce a binding agreement. Illusory promises sound like an agreement but promise nothing. Illusory promises permit the promisor not to fulfill the promise.