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Contracts: FORMATION DEFENSES

Terms in this set (13)

50.
Having completed a very successful summer tour, in August the singer began hunting for housing befitting a rising music star. After some searching, he found a co-op apartment in New York City. Having agreed with the seller, Sam Sharman, on a price of $2.5 million, the singer
paid $250,000 cash and signed a five-year installment purchase contract for the balance. Upon full satisfaction, Sharman would deliver title to the apartment, free of any liens or encumbrances (other than those in favor of the apartment building owner or cooperative). After moving into the apartment, the singer was visited by an attorney, who introduced himself as a representative of Otis Owen, the actual owner of the apartment that the singer was presently occupying. Owen was preparing to return to the city and had sent the attorney to notify Sharman, who was subletting from Owen, that he had 14 days to vacate the premises. When the singer told the attorney he must be mistaken because the singer had purchased the apartment from Sharman, the attorney responded, "I'm sorry, sir, but you're the one who is mistaken. Mr.Sharman has never owned this apartment, and had no right to sell it to you. You have fourteen days to vacate."When the singer received a payment due notice from Sharman a day or two later, he returned it unpaid with a note stating that he would not pay Sharman one cent more and that he would see Sharman in court. Sharman sued the singer for breach of the installment purchase contract. The singer countersued, seeking judicial rescission of the installment purchase contract and the return of his $250,000 down payment.Was the singer obligated to pay Sharman the remainder of the installments as promised, despite the fact that Sharman did not have the right to sell the singer the apartment?

(A) No, because the singer lacked the requisite capacity to form a binding contract.
(B) No, because the singer was mistaken in his belief that Sharman had the right to sell the apartment.
(C) No, because Sharman misrepresented that he had title, or could give title, to the apartment to the singer.
(D) Yes, because the singer did not ask Sharman whether he had title to the apartment before agreeing to purchase it from him.