The Hobbit Contract

Ordinarily we don’t discuss legal issues relating to fictional settings that are dramatically different from the real world in terms of their legal system.  Thus, Star Wars, Star Trek, Tolkien’s Middle Earth, etc are usually off-limits because we can’t meaningfully apply real world law to them.  But the contract featured in  The Hobbit: An Unexpected Journey (which comes out this next weekend!) was just too good a topic to pass up, especially since you can buy a high quality replica of it, which is what I’m using for these posts.  The contract is over 5 feet long unfolded and is fairly dense with text, so there will probably be multiple posts about it.

There are a couple of reasons why I’ve decided to break our rule and write about the contract.  First, it seems fairly clear (to me, anyway) that Tolkien wrote the Shire (where hobbits live) as a close analog to pastoral England, with its similar  legal and political structures.  For example, the Shire has a mayor and sheriffs, and there is a system of inheritance similar to the common law.  The common law fundamentals of contract law have not changed significantly since the time that the Shire is meant to evoke, so it makes sense that the contract would be broadly similar to a modern contract (and likewise that we could apply modern contract law to it).  Second, reading the contract it seems likely that a lawyer (or at least someone who had read a lot of contracts or did some research) had a hand in writing it.  We will not have to struggle to find legal issues to discuss here; they pretty well leap off the page.

So, without further ado it, let’s get to it.

I. The Contract in General

As mentioned, the contract is quite long.  This is in contrast with the contract as described in the book, which is very terse.  Its terms amounted to this:

For your hospitality our sincerest thanks, and for your offer of professional assistance our grateful acceptance. Terms: cash on delivery, up to and not exceeding one fourteenth of total profits (if any); all travelling expenses guaranteed in any event; funeral expenses to be defrayed by us or our representatives, if occasion arises and the matter is not otherwise arranged for.

Even in the book’s version we see an issue: the dwarves accept Bilbo’s “offer” but then proceed to give terms.  This is not actually an acceptance but rather a counter-offer, since they’re adding terms.  In the end it doesn’t matter because Bilbo effectively accepts the counter-offer by showing up and rendering his services as a burglar, but the basic point is that the words of a contract do not always have the legal effect that they claim to have.  Sometimes you have to look past the form to the substance.

But back to the movie version.  It has at least 40 major sections and numerous footnotes and digressions in smaller type.  We will begin at the beginning, go on till we reach the end, and then stop, except where the form of the contract requires some jumping around.

II. Entire Agreement Clauses and the Parol Evidence Rule

The contract (titled “Conditions of Engagement”) begins thus:

Agreed hereto, freely and under neither duress nor force nor coercion nor extortion nor threat to life and/or limb and superceding any prior contract, agreement or undertaking, survivable clauses notwithstanding, signed and witnessed below, as set forth hereunder:

This section has two major parts.  First, there is a recital that the contract is entered into voluntarily.  Mutual assent is required for any contract, and although duress would make a contract voidable, the recital isn’t terribly meaningful.  After all, one can just as easily be forced to sign a contract that has such a recital as one that doesn’t, so it doesn’t really prove anything.  However, it’s the sort of “can’t hurt”, boilerplate legalese that sets the style for the rest of the contract.

Next, there is a kind of “entire agreement clause” or integration clause.  This is a very common and important part of many contracts.  The purpose of an integration clause is to make it clear that the contract constitutes the entire agreement between the parties (hence the term).  That is, that all other prior versions of the contract, oral or written negotiations, etc are immaterial.  What matters is only what’s on this particular written contract.  Why is this important?  Because otherwise one party or the other might try to import terms or definitions into the contract from earlier versions or from prior negotiations or discussions.

For example, suppose the contract defines the term “profits” in a certain way, and further suppose that Bilbo and the Dwarves discussed profits at the party before signing the contract.  If there is a disagreement about the meaning of the term, can Bilbo or the Dwarves bring up the prior discussion?  Not if there is a valid integration clause.  This is what’s known as the parol evidence rule.

The integration clause at the beginning of the contract is backed up by another one later on in the contract:

This agreement constitutes the entire agreement between the parties, and replaces and supercedes all prior understandings and agreements, whether written or oral, with respect to the subject matter described and set forth herein.

Now that clause could have been lifted directly from a modern contract (and probably was).

III. Additions and Changes

Next we see a few different places in the contract that refer to changes to or amendments to the contract:

(And as appended to from time to time at the sole discretion of the Director, with the new material being read as if originally included herein)

Conditions subsequently appended or added to this Contract are automatically assumed to be agreed upon, as if they were present, read and understood at the signing and witnessing thereof.

Burglar may not modify or charge this Contract in any way except by a writing signed and agreed to by both parties hereto.

As you might guess, the first two clauses are highly suspect.  The parties to a contract can always agree to modify a contract or substitute a new contract, but there is still the requirement of mutual assent, and one can’t assent to something that one hasn’t seen.  The third clause is much closer to what one sees in modern contracts, particularly the requirement of a signed writing for any modifications (as opposed to allowing modification by oral agreement).

Since the contract has a couple of blatantly unenforceable terms, does that make the whole thing unenforceable?  Ordinarily it might, but not in this case, thanks to…

IV. The Severability Clause

The contract contains a couple of severability clauses, which allow unenforceable parts of the contract to be severed from the contract without affecting the rest:

If any provision of this Contract is held unenforceable, then such provision shall be modified to reflect the parties’ intention. All remaining provisions of this Contract shall remain in full force and effect.

If any part of this Contract is found to be invalid, the remainder of the contract will continue in full force and effect as if the defective and invalid provision or clause or condition had been deleted, provided that the parties to this contract are entitled to negotiate a valid and enforceable provision in replacement of the invalid provision.

Severability clauses (also sometimes called savings clauses) are a common part of modern contracts.  They’re also sometimes included in new laws, so that if part of the law is struck down then the rest of it remains in force.

V. Conclusion

So far the contract is reasonably well written, although it contains a few suspect terms.  We’ve only just scratched the surface, so look forward to more coverage of the contract in the coming weeks!

39 Responses to The Hobbit Contract

  1. Hmm… this might be a good place to add in a question I’ve occasionally asked. As background information, my father is an attorney, currently working in banking. As the children in the family grew up, my father impressed upon us that we should read every contract before signing and that we should never be afraid to make modifications, initialing and dating each modification, as we went. In cases where the other person signing was right in front of me, I always felt secure in doing so (and generally did warn them that I had made changes, offering to explain my reasoning on each, which largely amounted to cases where I felt there was prior boilerplate that didn’t fit, or phrases which gave the opportunity of one side to screw the other over even if there was no intent to do so). In other cases, the contract then got sent out (after I got a copy with my modifications and signature) and getting acknowledgement of their signature was not always guaranteed. At what point is it reasonable to consider the contract binding in such cases?

    And, on the note, was my father’s advice to modify contracts sound (other than, of course, the danger of screwing yourself over by adding wording that makes you worse off due to a lack of legal acumen)?

    • I’m afraid that’s a bit too close to actual legal advice for comfort. There are not only contract law issues but also principal/agent issues (e.g. does the person one is talking to actually have the authority to bind the party to the contract by agreeing to a modification to the contract?). It would further depend on the terms of the contract and which jurisdiction’s laws the issue was judged under (which may or may not be the state in which the contract was signed, if the contract has a choice of law clause). It’s one thing to discuss these topics in a general way for fun or education, but real world legal issues are much more complicated and fact-dependent.

      • :) Noted. FWIW, Dad gives me the same answer a good number of times when I ask him a general question about law (generally prefaced with “I’m not qualified to practice law in State X”)

    • Unlike, Mr. Daily, I don’t have a law license to protect (interpret that carefully!)

      The general case is that a counteroffer (which is what it sounds like you’re doing) must be accepted to create a contract, just like any other offer must be accepted to form a contract. So, your question really is “how do I know if my counter offer has been accepted or not? The answer is, a contract can either be accepted by notification of acceptance or by performance. (It gets more complex, of course. An offer may include specific limitations on how and when it may be accepted, and if does, a purported acceptance that does not follow the form specified in the offer may or may not be enforceable.) So… if you mark up the terms, but the terms include a “no modifications” clause, things get interesting. If you mark up the terms, but the other party neither notifies you of their acceptance nor takes steps to perform their side of the contract, you probably don’t have a contract. If you mark up the contract and they do take steps to perform their side of the contract, you probably do have a contract on your terms, although depending on the outcome of the contract it is by no means certain that you do, so if the stakes are high do engage the services of a contract attorney licensed to practice in your state or territory.
      Finally, it is important to note that in the U.S., contracts for the sale of goods are covered by an entirely separate body of law rooted in statutory form rather than descended from the common law as are contracts generally, and there are important and substantial differences between common-law contracts and UCC contracts.

  2. In part III you say ” The parties to a contract can always agree to modify a contract or substitute a new contract, but there is still the requirement of mutual assent, and one can’t assent to something that one hasn’t seen.” That may be true in most cases but in Federal contracting there is something known as the “Christian doctrine” which states that if a contract clause that is required to be present is mistakenly omitted, it still applies just as if it were present.

    Also, would this contract be enforceable since it is calling for Bilbo to engage in illicit activities? He’s even called “Burglar” in the text noted above. Admittedly one could argue that he was only trying to retrieve stolen property but does that change the situation?

    • That’s a fair point, but there’s a difference between adding a required term (e.g. the time for delivery in a contract for the sale of goods) and adding new terms out of whole cloth, which is what those clauses contemplate.

      As Gandalf says, “you can say Expert Treasure-Hunter instead of Burglar, if you like.” But the title given in the contract is not important but rather what services Bilbo is actually contracted to perform, which we’ll discuss in detail in a future post.

    • But attempting to contract with the government itself requires entry of a contract, and I suspect this “missing required terms” is construed as originating in that contractual relationship. Thus, the actual contract is actually a subcontract of a contract that requires some terms to be present.
      (Here I’m interpreting “missing term” to be something more along the lines of a contract for road construction requiring a set-aside for minority-owned businesses. If the highway department writes a contract with a paving contractor for 100 million dollars, and a federal regulation requires that all contracts for more than $50 million that include subcontracting authority set aside at least 10% of the total contract for minority-owned businesses, but they write the contract without that requirement by accident, it still applies even though it isn’t in the contract.)

      Perhaps I’m jumping ahead too far (since this is going to be explored further in a later posting) but I believe Bilbo’s role is less like a “burglar” and more like a “privateer”. From Smaug’s point of view, he’s a sneaky little thief, but to the dwarven nation, he’s seizing property for the Crown. Had the men of Dale not intervened, Smaug would have had his justice instead of the dwarves having theirs.
      With regard to Smeagol, however, he is clearly a thief. The ring is treasure, hidden underground and discovered by Bilbo, but there is no doubt as to who has the superior claim to rightful ownership when Bilbo conceals the ring and intends to remove it to another place.

      • At the time Bilbo didn’t have any idea that the ring belonged to Gollum and didn’t until after Gollum had begun to behave aggressively and with intent to murder Bilbo (at which point it was hardly wise to remain and attempt to return the lost property to Gollum).
        Anyway it would probably help the legality of the contract a lot if they didn’t make explicit mention of the fact that the job includes (on basis of the title used) burglary.

      • James Pollock

        Except he did. Gollum was wandering throughout the caves, moaning about losing the ring; Bilbo finds a ring and conceals it while negotiating with Smeagol for assistance in leaving the caves (because the ring influences him; it doesn’t want to return to Smeagol, it wants to be carried out of the caves.)

      • If memory serves Gollum (or Smeagol) was screaming about “the precious” and it never occurred to Bilbo until later (after Gollum had gone to his underground island home with the intent to use the ring to kill Bilbo) that the ring might be Gollum’s. By the time Gollum was screaming “thief” he was so aggressive (and someone who had already threatened to eat Bilbo if he lost a game) that I think any reasoning person would have run for it and made any attempts to return lost property at a much, much later date.

  3. One of the few details we get about hobbit law is that wills require seven witnesses, who must sign in red ink. That’s not quite English common law, but it’s the same spirit.

    The book itself includes a legal wrangle of the ownership of Smaug’s hoard. Basically, the dwarves say it’s all theirs, as legitimate heirs of the original kingdom under the mountain. The elves say a portion of the hoard is items they paid for which were never delivered, thanks to Smaug, though the dwarves claim the elves hadn’t paid the agreed price. The men of Dale claim a portion on multiple grounds: compensation for the injuries inflicted by the dragon, reward for killing the dragon, payment for hospitality rendered in expectation of killing the dragon (an implicit oral contract), and rightful ownership of those parts of the hoard Smaug stole from Dale and neighbouring towns.

    The legitimacy of Bilbo’s contract presumably depends on part on the legitimacy of these conflicting claims. If it purports to assign Bilbo title to property which is not legally theirs, would the courts, under common law of contracts, interpret it as giving Bilbo a 14th share of what is legitimately the dwarves’ or would they void it completely?

    • You can only convey by contract only those rights that you have. So, if you and I enter a contract wherein I sell the Brooklyn Bridge to you, you can’t take possession because someone else has a superior claim to yours, even if you wave the contract at them. The common-law, however, has rules for handling the discovery of a treasure hoard, and rules for handling lost property. Smaug’s treasure is the first, and the one ring is the second. Treasure hunters can, and do, enter contracts dividing up whatever they find, before anything is found, although today most treasure-hunters are looking for shipwrecks, and not caches of forgotten loot buried underground.

      • Is Smaug’s hoard treasure in the legal sense, or is it stolen goods?

        Laws on treasure trove do vary, but the hoard wasn’t deliberately hidden, and there are multiple groups with a plausible claim to be the original owners of at least part of the hoard, or their heirs.

      • That raises an interesting notion, that might be worth mention when discussing the fourteenth-share split (presumably in a later post). Should the One Ring be counted towards the profits of the joint venture, even though it is not acquired from the hoard of Smaug?

      • David Johnston

        Whether its treasure or recovered stolen goods would depend on whether Smaug is legally classified as a person or a talking catastrophe.

      • James Pollock

        Smaug takes gold from other places and secretes it underground. It’s almost a definitional treasure trove.
        Dictionary.com offers:
        “Law. any money, bullion, or the like, of unknown ownership, found hidden in the earth or any other place: in the absence of statutory provisions to the contrary it may be kept by the finder. ” and “law valuable articles, such as coins, bullion, etc, found hidden in the earth or elsewhere and of unknown ownership. Such articles become the property of the Crown, which compensates the finder if the treasure is declared. In 1996 treasure was defined as any item over 300 years old and containing more than 5% precious metal.”

        Obviously, Mr. Tolkien was unaware of the statutory changes made in the U.K. in 1996.

      • The “of unknown ownership” part is the problem. It’s pretty clear who owns most of the treasure, and even in the case of certain disputed items there’s a pretty short list of potential owners.

      • Note too, the treasure wasn’t exactly hidden. All the parties with a prior claim knew just where it was – in the main chamber of the Lonely Mountain, where Smaug slept – nor had Smaug made any particular attempt to conceal the location.

      • Dragons raid for as far as they can range, and they mix up the gold together (merging some Tolkien with some general dragon lore) so what’s in the hoard would be a mixed, quite possibly melted-together, collection of gold taken from as many sources as Smaug could manage. Smaug has been sitting on the gold for several generations of the shorter-lived species, and even the dwarves have gone through a couple of generations while Smaug was sitting on “their” gold. So, any claim of ownership to any specific item in the hoard is going to be difficult to establish, even though everyone who had their gold taken by Smaug knows right where it went. So, the treasure escheats to the Crown, which in this case, means the King of the Dwarves, Thorin Oakinshield, with shares to be paid to the “finder”, Mr. Baggins, and to others as reward for services rendered.

        The treasure is “hidden” underground in the sense that it’s not visible from outside the dwarven halls. Of course, various states have adapted the law of treasure trove, so that some do not require the trove to actually be underground (thus covering a trove found concealed in the walls or under the floorboards of a house, for example. The rules are quite complicated and take up a full week of first-year Property class.

        You missed an interesting problem, which is a big part of why treasure-trove escheats to the state/Crown… sorting out the people who have a rightful claim to the treasure from the people who do not have a rightful claim to the treasure, but make a claim anyway. The simple rule of “it goes to the Crown” dispenses with what could otherwise be a very long, very complicated process of finding out who has claims to what. Note the difficulty in sorting out claims of people who were separated from their valuable property by the Nazis, even as regards to one-of-a-kind, readily identifiable objects such as artwork.

      • It would be possible to at least guess at the probable origin of some part of the hoard by noting how much gold was in a coin, where it says it was minted at, how the gems had been cut, who was known to use that particular armor etc. Even with roughly perhaps 14th century technology they still could make an estimate of what was from where, assuming of course that anyone would actually want to put that much effort into it instead of a more politically pleasing decision.

  4. You’re saying that those “Additions and Changes” clauses are unenforceable — at least, those clauses that allow unilateral changes by one party, without notification. Those are in every single online Terms of Service and Privacy Policy that I’ve ever read. Has this seriously never been tested in court? Is everybody actually held only to the privacy policy that they signed when they got their facebook account in 2004?

    • If you check the Facebook terms, you’ll see that it provides that “We can change this Statement if we provide you notice … Your continued use of Facebook following changes to our terms constitutes your acceptance of our amended terms.” Legally there’s a substantial difference between that and “we can change these terms at any time without notice, and you are deemed to have accepted them as though they were part of the original agreement, and if you don’t like it, tough, because if you quit then you’re in breach of contract and are still subject to the new terms.”

      • If I recall correctly, didn’t Microsoft try to pull that with the Windows EULA, stating that they could change terms as desired without notice or announcement?

        I feel like there’s a parallel with someone getting arrested for something that’s just been made illegal without notice of illegality, but I think that’s actually not forbidden (if you criminalize selling oregano, you can go out and arrest current sellers before the ink’s dry on the law, although you can’t go after them for the sales the day before). Although that does lead to the question, is there any requirement to publish that terms or laws have been changed in a way that a reasonable person would know, or can people do the equivalent of HHGttG where the plans are “on display” if what you mean is that they’re “on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying ‘Beware of the Leopard'”?

      • James Pollock

        There is an important difference in sales of software. In software sales, 99.9%+ of the time you aren’t buying the software, you’re buying a license to use the software. In other words, you don’t own anything, you have permission to use something that belongs to other people. Since permission to use something can be revoked in a way that ownership of something can’t be, you get different rules.

        With Facebook, the important thing is not your permission to use their service for free, it’s their permission to keep using your personal information, which is authorized by your continued use of the FB website.

  5. The Hobbit opens a week from tomorrow, not this weekend. We’re driving 500 miles to Phoenix to see it in a good theater. Of course, we’re also spending a week there, but that’s just happy coincidence.

    I need to re-read the book, I don’t recall the contract taking that much space in it. But it’s been a long time since I last read it.

    • I (optimistically) mis-remembered the opening date. I’ll correct it in the post.

      The book’s version is pretty short, just 60 words. The movie version includes pretty much everything in the book version, but adds a lot to it. Since the book describes the contract verbatim, the movie is definitely making stuff up out of whole cloth. Whether a rambling, detailed contract or a short, terse one is more quintessentially dwarfish is a matter of debate for the Tolkien scholars, I guess.

      • James Pollock

        Since neither hobbits nor dwarves have word processors (nor even legal secretaries), I would expect that their contracts would be a bit more terse than our own.

  6. And do contracts really have “sanity clauses”? Or was Harpo right — there ain’t no Sanity Clause?

  7. Pingback: The Hobbit Contract, Part 2 | Law and the Multiverse

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  9. Pingback: The Hobbit Contract, Part 3 | Law and the Multiverse

  10. Funny how the length of the contract compared is sort of a precursor to how the movies in general relate to the book.

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  12. Pingback: The Hobbit Contract, Part 4 | Law and the Multiverse

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  17. I question whether Smaug’s hoard can rightfully be counted a treasure trove. He was sitting literally on top of it the whole time, maintaining an active possessory interest in it. If he wasn’t sentient, maybe (a magpie’s nest containing gold rings, for example), but he quite clearly is. Burying a metal box in my yard doesn’t turn it into a treasure trove that anybody can take.

    I don’t think Smaug is a thief, either. He obtained his treasure through conquest, which, while frowned upon in modern times, is a recognized method of obtaining title to property. (If it wasn’t, most of America would have to be returned to the natives, and the same sort of thing would have to happen all over the world.)

    Given that Smaug’s realm was conquered by slaying Smaug, and Smaug was slain by Bard, operating in his official capacity as a military leader of Dale, Smaug’s treasure is rightfully Dale’s. The brief dwarven occupation of the Lonely Mountain may throw a bit of a wrench into that equation, though.

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