Disaffirming a Contract Introduction: Students have learned about the first two elements of a legally binding contract: Agreement and Consideration. Capacity is the third element of a legally binding contract. A person who has legal capacity to contract is one who has the mental ability to understand their rights and obligations under a contract. Incapacity, as defined by the law, is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract. Depending on the nature and extent of the defect, a person may have either no capacity, and therefore any attempted contract is void, or limited capacity, resulting in the ability to form only voidable contracts. Concept Review: One of the oldest limitations on capacity is the ability of minors to enter into only voidable contracts. In most states, a minor is someone under the age of 18. Because their contracts are voidable, minors have the right, until a reasonable time after reaching the act of majority, to disaffirm, or avoid, their contracts. Case: Please read CASE 11-1: Adrian Lopez v. Kmart Corp., 2015 U.S.Dist Lexis 58328 (2015). FACTS: In April of 2013, Kmart hired Adrian Lopez as a cashier in its Concord, California store. At the time, Lopez was 16 years old and a sophomore in high school. Before Lopez began working, he was required to participate in Kmart's online training program. During the program, Lopez was presented with an electronic arbitration agreement. The agreement stipulated any disputes Lopez might have with the company were to be handled out of court in arbitration. Lopez electronically signed the agreement and acknowledged his receipt of the agreement. In January of 2015, one month after his 18th birthday, Lopez filed a class action complaint against Kmart alleging violations of California wage and hour laws. Kmart filed a motion to compel arbitration. Lopez contended that, because he was a minor when he acknowledged the agreement, he is now entitled to disaffirm the agreement and render it void, thus allowing Lopez to pursue his claim in court. QUESTION: Did Lopez have the right to disaffirm the agreement due to him being a minor when he signed it? REASONING: To begin the case, the district court found that the arbitration agreement was indeed valid, but acknowledged that this fact hardly mattered if Lopez had the right to disaffirm the agreement. The court had to find whether Lopez was entitled to disaffirm the arbitration agreement or if he even had the capacity to enter into the agreement at all as a minor. The court found that the California Family Code clearly provides that a minor has the capacity to contract, and that [e]xcept as otherwise provided by statute, a contract of a minor may be disaffirmed by the minor before majority [age 18] or within a reasonable time afterwards[.] Lopez claimed disaffirmance within a month of reaching the age of majority, which the court found to be a reasonable period of time. The court also cited Fife v. Facebook, a case that found that disaffirmance of a contract by a minor rescinds the entire contract, rendering it void. The court also noted that the California Family Code does specifically exclude certain types of contracts from disaffirmance, such as contracts for necessaries for the minor or the minor's family, and ruled that Lopez's contract with Kmart is not one of those types of contracts. DECISION: Lopez had the right to disaffirm the agreement and did so in a timely manner, rendering the agreement void. Kmart's movement to compel arbitration was denied and Lopez was free to pursue his class action claim in court. SIGNIFICANCE: This case demonstrates the power a minor has to disaffirm any contracts he or she enters into and may serve as a caution to those entering into contracts with minors. DISCUSSION REQUIREMENTS Question Presented: Answer the Critical Thinking Question OR the Ethical Decision Making Question. In either case, you must define critical terms. Critical Thinking Question: Kmart's attorney argued unsuccessfully that by allowing the minor to disaffirm the employment, the court was discouraging employers from hiring minors in the future. Do you think the court should have given more weight to this argument? As part of your answer, please define disaffirm (or disaffirmance) and minor as part of your original comment. OR Ethical Decision Making: What values were in conflict when the court made this decision? As part of your answer, please define values, as defined in Chapter 2, and define the values you choose to discuss