IN THE

SUPREME COURT OF THE STATE OF ARIZONA

EVA CORNELL, 

Plaintiff, 

v.

DESERT FINANCIAL CREDIT UNION, ET AL.

Defendants. 

No. CV-22-0071-CQ

Filed March 2, 2023 

Certified Questions from the United States District Court of Arizona

The Honorable Dominic W. Lanza, Judge 

No. CV-21-00835-PHX-DWL

QUESTION ANSWERED

COUNSEL:

Cindy C. Albracht-Crogan, Kaysey L. Fung, Cohen Dowd Quigley, 

Phoenix; and Steven A. Haskins (argued), Richard D. McCune, David C. 

Wright, Emily J. Kirk, McCune Law Group, ACP, Ontario, CA, Attorneys 

for Eva Cornell

Brian A. Cabianca (argued), David S. Norris, Lukas M. Landolt, Kaitlyn R. 

Hertzog, Squire Patton Boggs (US) LLP, Phoenix, Attorneys for Desert

Financial Federal Credit Union

Karl M. Tilleman, Jason Sanders, Douglas D. Janicik, Dentons US LLP, 

Phoenix, Attorneys for Amici Curiae Chamber of Commerce of the United 

States of America and Arizona Chamber of Commerce and Industry

JUSTICE LOPEZ authored the Opinion of the Court, in which CHIEF

JUSTICE BRUTINEL, VICE CHIEF JUSTICE TIMMER, JUSTICES BOLICK,

BEENE, MONTGOMERY, and KING joined.
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

Opinion of the Court

2

JUSTICE LOPEZ, Opinion of the Court:

¶1 The United States District Court for the District of Arizona 

certified two questions for our review: (1) Does an effective modification of 

a consumer contract occur when the offeror sends notice of the proposed 

modification to the offeree, through a communication channel to which the 

offeree previously consented, even if the offeree fails to respond?; and (2) If 

not, what additional showings (such as actual receipt of the notice of 

proposed modification, subjective understanding of the proposed 

modification, or affirmative consent to the proposed modification) are 

necessary to achieve an effective contract modification in this circumstance?

¶2 We hold that on-going, at-will, consumer-business 

relationships consist of the day-to-day offer and acceptance of unilateral 

contracts; thus, businesses may effectively modify the non-negotiated, 

standardized terms governing these relationships if the business 

demonstrates that (1) the contract’s initial terms expressly notified the 

consumer that the business could make future changes to the terms; (2) the

business gave—and the consumer received—reasonable notice of the 

modification and an opportunity to opt out with no change to the status 

quo business relationship; and (3) the consumer continued the business 

relationship past a reasonable opt-out period. In so holding, we adopt the 

Restatement of Consumer Contracts § 3 (Am. L. Inst., Tentative Draft No. 2, 

2022) (“Restatement § 3”) to the extent our previous holding in Darner 

Motor Sales v. Universal Underwriters Insurance Co., 140 Ariz. 383 (1984), does 

not provide for this result. Our answer to the first question in the 

affirmative obviates the need to address the second question.

BACKGROUND

¶3 In October 2018, as a part of opening checking and savings 

accounts with Desert Financial, Eva Cornell agreed to certain terms and 

conditions (the “Terms”). These stated that Desert Financial could “change 

those terms and conditions from time to time.” Cornell also “consented to 

the electronic delivery of all future communications from Desert Financial, 

including all disclosures, notices, and account statements.” At that time,

the Terms did not contain an arbitration clause. 

¶4 When Cornell agreed to the Terms, she was subjectively 

unaware of the absence or presence of an arbitration clause. In a later 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

Opinion of the Court

3

deposition, she testified that even had the Terms originally included an 

arbitration clause, and she knew of the clause, she would have still agreed 

to the Terms.

¶5 In February 2021, Desert Financial updated its Terms, adding 

a mandatory arbitration clause. The clause appeared on page five of a 

fourteen-page document and began as follows: “DISPUTE RESOLUTION:

MANDATORY ARBITRATION. READ THIS PROVISION 

CAREFULLY AS IT WILL HAVE A SUBSTANTIAL IMPACT ON HOW 

LEGAL CLAIMS YOU AND THE CREDIT UNION HAVE AGAINST 

EACH OTHER WILL BE RESOLVED.” The following text explained that 

“[a]rbitration is not a mandatory condition of you maintaining an account 

with Credit Union” and that “YOU MAY OPT OUT of this arbitration 

provision so long as the Credit Union receives notice of your desire to optout by April 30, 2021 or 30 days after you open your account, whichever is 

later.” The clause also explained how to opt out.

¶6 Desert Financial did not directly contact its account holders

concerning its updated Terms. Rather, it posted on monthly account 

statements a contrasting orange-and-blue banner stating in large block 

lettering: “Change-in-Terms.” In much smaller font, the banner informed 

readers that the changes concerned “how we will resolve legal disputes 

related to your accounts.” At the banner’s bottom, it directed readers to 

view the complete and updated version of the Terms by clicking on a

provided URL written in bold font typical to hyperlinks.

¶7 Because Cornell opted for electronic communications, she did 

not receive account statements in the mail. On March 23, 2021, Desert 

Financial notified her that her March account statement was available for 

online viewing. The “Change-in-Terms” banner appeared on the 

statement, which she could access any time she signed into her account.

¶8 On April 13, 2021, in conjunction with her efforts to buy a car, 

Cornell used Desert Financial’s mobile app to download a PDF of her 

monthly account statement for March 2021. During the downloading 

process, she saw the “Change-in-Terms” banner appearing on the 

statement. Later, when she was unable to locate her downloaded PDF, she

again saw the banner when she obtained an electronic copy of the March 

2021 statement from Desert Financial via DocuSign. Ultimately, she never 

clicked the banner’s URL, viewed the updated Terms, or took the 

prescribed steps for affirmatively opting out of the arbitration clause.
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

Opinion of the Court

4

¶9 On May 5, 2021, Cornell filed a class action suit in the District 

of Arizona, alleging “ambiguous and misleading language” concerning 

overdraft fees in violation of federal law. In response, Desert Financial 

moved to compel arbitration, arguing that the February 2021 arbitration 

clause became part of its Terms binding on Cornell. Cornell argued that 

she never assented to the updated Terms; thus, the arbitration clause was 

never incorporated into her agreement with Desert Financial.

¶10 On October 8, 2021, the district court ordered supplemental 

briefing on whether Cornell’s continued patronage following Desert 

Financial’s amendment and notice via the orange-and-blue banner 

constitutes “a valid contract modification under Arizona law.” Following 

a hearing and review of the parties’ briefing, on March 11, 2022, the district 

court certified to this Court two questions concerning contract 

modification. Because Arizona law is unclear concerning the requirements 

for unilateral modification of standard consumer contracts, we agreed to 

provide clarification pursuant to our jurisdiction under article 6, 

section 5(6) of the Arizona Constitution and A.R.S. § 12-1861. 

DISCUSSION

¶11 In considering the requirements for modifying the terms of

at-will, on-going, business-consumer relationships, we conclude that our 

jurisprudence does not provide definitive guidance. To fill this void, we

adopt Restatement § 3 because it is consistent with Arizona contract law 

and sets forth sound public policy.

I.

A.

¶12 We begin with fundamental Arizona contract law, which 

distinguishes between bilateral contracts and unilateral contracts. Knack v. 

Indus. Comm’n, 108 Ariz. 545, 548 (1972). Bilateral contracts consist of an 

exchange of promises. Id.; Wagner v. City of Globe, 150 Ariz. 82, 85 (1986) 

(“[B]ilateral contract[s] . . . require mutuality of obligation . . . .”). Once a 

bilateral contract is formed, its terms cannot be modified absent an 

additional offer, acceptance, and consideration. Demasse v. ITT Corp., 

194 Ariz. 500, 506 ¶ 18 (1999). 

¶13 In contrast, unilateral contracts are formed upon the offeree’s 

acceptance by performance. Id. at 515 ¶ 53 (Jones, V.C.J., concurring in part 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

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5

and dissenting in part) (describing unilateral contracts as the “performance 

of an act in exchange for a promise to pay”). Before performance is 

rendered, the doctrine of contract modification does not apply to offers of 

unilateral contracts because there is no contract to modify, as shown in the 

at-will employment context:

At-will employment contracts are unilateral and typically 

start with an employer’s offer of a wage in exchange for work

performed; subsequent performance by the employee 

provides consideration to create the contract. Thus, before 

performance is rendered, the offer can be modified by the 

employer’s unilateral withdrawal of the old offer and 

substitution of a new one: the employer makes a new offer 

with different terms and the employee again accepts the new 

offer by performance (such as continued employment). Thus 

a new unilateral contract is formed—a day’s work for a day’s 

wages.

Id. at 504–05 ¶ 12 (internal citations omitted). In this scenario, the next day’s 

unilateral contract offer’s terms may be changed at any time before 

performance. Id.; accord Wagner, 150 Ariz. at 85–86; see also Johnson v. 

Associated Milk Producers, Inc., 886 N.W.2d 384, 392 (Iowa 2016) (“In an atwill contract, a party who gives notice of a changed term effectively offers 

a new contract in place of the existing one, which the other party may accept 

by continued performance.”).

¶14 Applying this at-will contract modification doctrine, the 

Alabama Supreme Court held that at-will bank patrons “implicitly assented 

to be bound by [new] arbitration provisions by holding open their accounts 

after notice of the amendment.” SouthTrust Bank v. Williams, 775 So. 2d 184, 

191 (Ala. 2000). The court reasoned that “[a]mendments to the conditions 

of unilateral-contract relationships with notice of the changed conditions 

are not inconsistent with the general law of contracts.” Id. at 190–91.

¶15 Conversely, a bilateral employment contract’s terms may 

only be modified with an offer, acceptance, and consideration. Demasse, 

194 Ariz. at 506 ¶ 18. In proving acceptance, the employer carries the 

burden to show that the employee (1) received “legally adequate notice,” 

which is “more than the employee’s awareness of or receipt of the newest 

[employee] handbook,” id. at 508 ¶ 24; and (2) “assented with knowledge 

of the attempted modification and understanding of its impact on the 

underlying contract,” id. ¶ 23. 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

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¶16 In Demasse, this Court answered a certified question

concerning employment contract modification. Id. at 502 ¶ 2. The initial 

terms of the case’s particular contract did not expressly allow unilateral 

changes to the terms, id. at 503 ¶¶ 4, 6, and for purposes of answering the 

certified question, we assumed that the contract was bilateral. Id. ¶ 5 n.1. 

Accordingly, we treated the inclusion of a reverse-seniority layoff provision 

to the contract as creating an implied-in-fact, bilateral, contractual term. Id.

at 503 ¶ 5, 504 ¶ 11. We reasoned that, by creating job security, the 

provision “substantively govern[ed] the employee’s job and employment 

expectations”; thus, “‘the employer should reasonably have expected the 

employee to consider [the provision] as a commitment from the employer,’” 

as required for implied-in-fact employment contracts. Id. at 505 ¶ 16

(quoting Soderlun v. Pub. Serv. Co., 944 P.2d 616, 621 (Colo. App. 1997)). 

Ultimately, we found ineffective the employer’s unilateral attempt to 

modify the bilateral contract’s reverse-seniority layoff term. Id. at 507 ¶ 21, 

508 ¶¶ 24–25. 

¶17 Cornell cites federal court rulings,1 arguing that Demasse’s 

stringent modification rule applies to her and Desert Financial’s at-will 

banking deposit agreement. We disagree. Cornell and Desert Financial’s

business relationship consists of day-to-day unilateral contract offers and

acceptances. Like the at-will bank patrons in SouthTrust Bank, Cornell was 

free to terminate her accounts with Desert Financial at any time and vice 

versa. This materially differs from Demasse, where we considered the 

1 Rose v. Humana Ins. Co., No. CV-17-08107-PCT-DGC, 2018 WL 888982, at *3 

(D. Ariz. Feb. 14, 2018) (holding that an insurer’s email failed to modify an 

agreement because “even if . . . [the insurer’s] evidence of sending the email 

is accepted as true . . . [i]t does not show that [the insured] read . . . [or] 

understood the email and assented to the arbitration agreement it 

contained”); Vantage Mobility Int’l LLC v. Kersey Mobility LLC, No. CV-19-

04684-PHX-JJT, 2021 WL 1610229, at *15–16 (D. Ariz. Apr. 26, 2021) 

(holding that a car dealer’s continued business with a supplier did not 

amount to acceptance of the supplier’s e-mailed offer to modify their 

existing agreement where the original agreement contained no unilateral 

modification clause, reasoning that “the daily business of sales did not 

implicate the terms of [the proposed modification],” and “[the supplier] 

produced no evidence that . . . gave [the dealer] reason to understand that 

[the dealer’s] assent could be manifested as silence or inaction”).
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

Opinion of the Court

7

modification of a bilateral employment contract whose original terms did 

not expressly provide for unilateral modification. Demasse does not 

articulate the applicable rule for altering the terms of at-will, on-going, 

consumer-business relationships. 194 Ariz. at 504 ¶ 11 (describing the 

difference between at-will agreements and bilateral agreements as 

“dispositive with regard to methods necessary for modification”); Taleb v. 

AutoNation USA Corp., No. CV-06-02013-PHX-NVW, 2006 WL 3716922, 

at *5 (D. Ariz. Nov. 13, 2006) (“The holding of the Arizona Supreme Court 

in [Demasse] is limited to situations in which an employer attempts to 

unilaterally modify a contract that creates an expectation of job 

security . . . .”). 

B.

¶18 Of our precedents, our decision in Darner comes closest to 

stating the applicable rule. In Darner, we held that courts may construe

standardized agreements to reflect oral assurances made during 

negotiations even where the contract’s unambiguous, boiler plate language 

directly conflicts with the assurances. 140 Ariz. at 395–96. We reasoned 

that although standardized contracts are integral to sustaining the sheer

volume of daily transactions in modern society, customers entering 

standardized agreements do not often read or fully digest them, id.

at 393–94; thus, customers “are not bound to unknown terms which are 

beyond the range of reasonable expectation,” id. at 391 (quoting 

Restatement (Second) of Contracts § 211 cmt. f (Am. L. Inst. 1981)). 

¶19 In so holding, we adopted the Restatement (Second) § 211, 

which recognizes that a term is unenforceable if “the other party has reason 

to believe that the party manifesting such assent would not do so if he knew 

that the writing contained a particular term.” Id. at 391 (quoting 

Restatement (Second) § 211). We further embraced Restatement (Second)

§ 211’s guidance concerning indicia of unenforceability of contract 

modifications: 

Such a belief or assumption may be shown by the prior 

negotiations or inferred from the circumstances. Reason to 

believe may be inferred from the fact that the term is bizarre 

or oppressive, from the fact that it eviscerates the nonstandard terms explicitly agreed to, or from the fact that it 

eliminates the dominant purpose of the transaction. The 

inference is reinforced if the adhering party never had an 

opportunity to read the term, or if it is illegible or otherwise 

hidden from view. This rule is closely related to the policy 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

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against unconscionable terms and the rule of interpretation 

against the draftsman. 

Id. at 392 (quoting Restatement (Second) § 211 cmt. f).

¶20 Synthesizing unilateral contract law with Darner, an at-will 

consumer’s continued patronage (i.e., performance of the next day’s 

unilateral contract) constitutes valid acceptance of the business’s new terms 

if the consumer knew of the new terms when performing, see Demasse, 

194 Ariz. at 504–05 ¶ 12, but the consumer cannot be bound by “unknown 

terms . . . beyond the range of reasonable expectation, ” Darner, 140 Ariz. 

at 391 (quoting Restatement (Second) § 211 cmt. f). For example, for the 

Terms to be enforceable against Cornell, Desert Financial objectively must 

have had no reason to believe that she would not have accepted the Terms 

“if [she] knew that the writing contained a particular term.” Id. (quoting 

Restatement (Second) § 211). 

¶21 Although this standard establishes the proper analytical 

framework, it fails to resolve whether enforceability requires the 

consumer’s actual knowledge of new terms, an issue that has divided 

courts. Compare Cap. One Bank v. Davey, No. 1 CA-CV 13-0109, 2013 WL 

6729261, at *5 ¶ 20 (Ariz. App. Dec. 19, 2013) (mem. decision) (“An offer 

cannot be accepted unless the offeree actually knows of the offer’s existence.”

(emphasis added)), with Hagin v. Fireman’s Fund Ins. Co., 88 Ariz. 158, 162 

(1960) (holding that an insurance company effectively modified an implied

contract term permitting late payments by mailing notice to its customer 

because “where all that [the insured] had to do was to open their mail, they 

are charged with constructive notice”). Darner provides no insight because 

it obviated the issue by effectively modifying the parol evidence rule. See

140 Ariz. at 391 (describing its adoption of the Restatement (Second) § 211 

as “basically a modification of the parol evidence rule when dealing with 

contracts containing boiler-plate provisions which are not negotiated, and 

often not even read by the parties”).

¶22 This framework also fails to address whether additional 

consumer protections are necessary in this context, such as (1) requiring 

express notice that the business may unilaterally modify terms and that the 

consumer’s failure to opt out constitutes acceptance, cf. SouthTrust Bank, 

775 So. 2d at 185 (observing that initial terms contained an express changein-terms clause); and (2) ensuring the consumer’s ability to opt out of 

proposed modifications without penalty, i.e., to reject a proposed 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

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modification and maintain the status quo business relationship.2 See

Restatement § 3(a)(2). Consequently, we are tasked with filling this gap in 

the common law.

II.

¶23 In the absence of binding precedent, we follow the 

Restatement if it sets forth sound legal policy. See In re Sky Harbor Hotel 

Props., LLC, 246 Ariz. 531, 533 ¶ 6 (2019). Notably, we have followed the 

Restatement of Contracts in interpreting and enforcing standardized 

contracts. See Darner, 140 Ariz. at 391. We also have followed draft 

statements. See, e.g., Sullivan v. Pulte Home Corp., 232 Ariz. 344, 346 ¶ 10 

(2013) (illustrating the Court aligning its opinion “with the most recent 

draft of the Restatement” (citing Restatement (Third) of Torts: Liability for 

Economic Harm § 3 cmt. a (Am. L. Inst., Tentative Draft No. 1, 2012)));

Peagler v. Phx. Newspapers, Inc., 114 Ariz. 309, 315 (1977) (“We hold the 

standard adopted in the Tentative Draft of the . . . Restatement (Second) of 

Torts . . . is the standard to be followed in this State.”).

A.

¶24 Restatement § 3 offers an effective modification procedure

that fairly balances the public policies of economic efficiency and consumer 

protection:

(a) A modification proposed by the business of a standard 

contract term in a consumer contract governing an ongoing 

relationship is adopted if the business demonstrates that:

(1) the consumer received reasonable notice of the 

proposed modified term and a reasonable opportunity to 

review it;

(2) the consumer received a reasonable opportunity, 

including reasonable notice of the opportunity, to reject 

2 To preserve the at-will nature of the relationship, businesses must be 

allowed to terminate the relationship if the consumer refuses to accept the 

new terms. Accordingly, Restatement § 3 balances consumer and business 

interests by recognizing this termination power subject to certain 

requirements: Businesses must expressly reserve this termination power in 

the agreement’s initial terms, and they may exercise it only if termination 

will not cause “unreasonable cost, loss of value, or personal burden.” 

Restatement § 3(b).
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

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the proposed modified term and continue the contractual 

relationship under the existing term, and;

(3) the consumer received reasonable notice that 

continuing the contractual relationship without rejecting 

the proposed modified term will result in the 

modification being adopted; and 

(4) the consumer either:

(A) manifested assent to the modified term, or

(B) did not reject the proposed modified term and 

continued to take the benefit of the contractual 

relationship after the expiration of the rejection period 

provided in the proposal.

Id. Thus, Restatement § 3’s central rule is that a business’s changes of its 

standard contract terms are binding on its at-will consumers if (1) the 

consumers received reasonable notice of the changes and of an opportunity 

to opt out without penalty; and (2) the consumer continues to do business 

past a reasonable rejection period. Id. There is no actual notice 

requirement. Id.

B.

¶25 Restatement § 3’s position merits our adoption—it is 

consistent with Arizona law and sets forth sound policy. Notably, it aligns 

with our prior decisions recognizing effective modification through silent 

conduct. See, e.g., Hagin, 88 Ariz. at 162 (finding effective modification of 

an implied term allowing late payments where the offeree received 

constructive notice that strict compliance with the agreement’s express 

payment schedule would be thereafter required and the offeree failed to 

object); Restatement (Second) § 19(3) (“The conduct of a party may manifest 

assent even though he does not in fact assent.”).

¶26 Restatement § 3’s approach also permits businesses to readily 

update their terms, which facilitates economic efficiency in the context of 

standardized contracts. Darner, 140 Ariz. at 391 (characterizing 

standardization as “essential ‘to a system of mass production and 

distribution.’” (quoting Restatement (Second) § 211 cmt. a)). Similarly, by 

rejecting an actual notice requirement, Restatement § 3 simplifies business 

operations and reduces transaction costs to the advantage of all parties 

concerned. It makes little sense to require parties to quit their at-will 

relationship just to immediately resume it with additional terms. See

Johnson, 886 N.W.2d at 392 (“We do not require formalistic language 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

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terminating an at-will contract before a change in terms will be effective 

going forward.”). 

¶27 We also recognize that Restatement § 3’s position imposes 

several safeguards to protect consumers from unfair exploitation. For 

example, businesses must propose modifications in good faith, and new 

terms cannot undermine negotiated parts of the original bargain. 

Restatement § 3(c); see also Rawlings v. Apodaca, 151 Ariz. 149, 153 (1986) 

(“The law implies a covenant of good faith and fair dealing in every

contract.”); Wagenseller v. Scottsdale Mem’l Hosp., 147 Ariz. 370, 383 (1985). 

¶28 Consumers also must receive reasonable notice that their 

failure to opt out of proposed modifications constitutes acceptance, and 

they must be given a reasonable opportunity to opt out without penalty. 

Restatement § 3(a); see also Duling v. Mid Am. Credit Union, 521 P.3d 1145, 

1154 (Kan. Ct. App. 2022) (“[F]ailure to opt-out of a voluntary arbitration 

program constitutes acceptance, especially where [it] is the exact form of 

acceptance [expressly] invited by the offer.” (quoting Rittenhouse v. 

GlaxoSmithKline, No. 21-1836, 2021 WL 6197361, at *4 (E.D. Pa. Dec. 30, 

2021))). At minimum, “reasonable notice” requires that the initial terms or 

the notice of the proposed modification expressly indicate the consumer’s 

ability to opt out and that failure to do so manifests the consumer’s binding 

assent. Restatement § 3(a); see also Miracle-Pond v. Shutterfly, Inc., 19 CV 

04722, 2020 WL 2513099, at *6 (N.D. Ill. May 15, 2020) (finding effective 

modification where the business gave notice of new terms pursuant to an 

express change-in-terms clause in the initial terms). 

¶29 These consumer safeguards supplement—and do not 

supplant—other contract defenses. See A.R.S. § 47-2302 (unconscionability);

Darner, 140 Ariz. at 391–92 (reasonable expectations). In other words, the

requirements for effective modification under Restatement § 3 do not 

preclude the application of other contract law.

CONCLUSION

¶30 We answer the first certified question in the affirmative. In an 

on-going, at-will, business-consumer relationship, effective modification of 

the relationship’s governing terms occurs if the business demonstrably 

satisfies the requirements of Restatement § 3 (as set forth in the Opinion and 

as follows): Consumers must (1) receive express and reasonable notice of 

the business’s right to unilaterally modify the agreement; (2) receive 

reasonable notice of new terms and the opportunity to opt out without 
CORNELL V. DESERT FINANCIAL CREDIT UNION ET AL. 

Opinion of the Court

12

penalty; and (3) upon receiving actual or constructive notice of new terms, 

continue the business relationship past a reasonable opt-out period. Our 

holding does not foreclose the applicability of contract defenses. We 

decline to answer the second certified question as moot.