The Hobbit Contract, Part 6

It’s been a long series, but we’re finally at the end of the contract, or at least of interesting parts to write about.  If you’re just joining us, here are links to parts one, two, three, four, and five.  In today’s concluding installment we’ll be talking about a few miscellaneous provisions and giving some thoughts on the contract as a whole.

I. A Security Interest

In an unusual change of tone, the contract contains a clause that is not in the Dwarves’ favor but rather in Bilbo’s:

If, however, Company does not make good on payment herein set forth, Company becomes liable for the whole amount, to give to Burglar, making the stipulation, the penalty of the double of the said amount, the aforesaid conditions remaining as settled.  Furthermore, Company pledges to Burglar as security for the aforesaid promises all its goods existing and future.

This is a remarkable clause for two reasons (and not counting the semi-incomprehensible middle section).  First, apparently the Dwarves have volunteered to be liable for a total of a 3/14ths share if they fail to pay Bilbo a 1/14th share in the proper way (in gold of correct weight or in other payment of good quality and correct and proper measure) and in the proper time (within one year of the completion of the Adventure).  Second, the Dwarves pledge the entirety of their assets (or at least their tangible goods) as a security interest not just for the payment but for all of the promises made in the contract (e.g. provision of a pony, meals, etc).  Given how lop-sided the rest of the contract is, this is a most generous set of terms.

Or is it?  It could be that the Dwarves realize that if they fail to pay Bilbo it’s probably because they didn’t realize any significant profits.  And it’s not clear that the Company (as opposed to the Dwarves individually) has any substantial assets at the outset of the venture.  Each member of the Company seems to have brought their own tools, weapons, etc.  It’s also possible that the Company already pledged its assets as security in an earlier transaction, giving another party priority over Bilbo.  So this could be a hollow promise in more ways than one.

II. A Survival Clause

There is a curious clause that is repeated throughout the document, both in the main text and in the addenda and margins:

All conditions imposed herein are deemed to survive loss or destruction of this document, whether by accidental of wilful mishap, fair means or foul, and any reconstruction, re-wording, updating or improvements or additions made shall include a condition similar to this condition, notwithstanding any repetition  redundancy, overstatement or implication hereby recognized or disclosed.

This is an odd clause because the loss or destruction of a writing does not void the contract.  In fact, not only is the contract still valid, but “The loss or destruction of a memorandum does not deprive it of effect under the Statute [of Frauds].”  Restatement (Second) of Contracts § 137.  If the original is lost then the contents of the contract can be proven via an unsigned copy or by oral evidence.  I suspect, then, that this clause is really included for humor rather than for (fictional) legal effect.

III. Ownership of the Ring

Given the clauses describing ownership of the recovered goods, one might wonder whether the Company has a claim to the One Ring.  After all, Bilbo has expressly agreed that he has only a right to 1/14th of the profits, to be paid in a form determined by the Company, and no right to the treasure itself.  So could it be that the One Ring merely forms part of the treasure?  The contract seems to indicate otherwise.

First, the contract describes the extraction of goods from the Lonely Mountain as being the subject of the Adventure, whereas the One Ring was found underneath the Misty Mountains.  Second, the contract includes this clause:

Specialist equipment required in the execution of duties in his professional role as Burglar shall be purchased, procured, purlioned [sic] or obtained by Burglar, by whatsoever method Burglar sees fit.

The One Ring is definitely “specialist equipment” and it turns out to be required in the execution of Bilbo’s duties in his professional role as Burglar.  Certainly he could not have defeated the spiders, evaded the Wood Elves, or snuck past Smaug without it (possibly only the last counts as proper burgling, but the point stands).  So the Dwarves would not appear to have any claim to the One Ring.

I probably would have left out the “purloined” part, though.  That comes dangerously close to making the contract unenforceable on the grounds that the subject matter of the contract is illegal.

IV. Closing Thoughts

One the whole the contract is pretty well written.  There are some anachronisms, unnecessary clauses, typos, and a small number of clear drafting errors, but given the contract’s length and its role in the film (which is to say not a huge one, especially in the particulars) it’s an impressive piece of work.  I do wish there had been less material obviously taken from a modern film contract*, but I can understand cutting a few corners here and there, and at least the filler is more-or-less apropos.  I congratulate prop-maker and artist Daniel Reeve on a strong piece of work.  A lesser studio or artist might have been tempted to go with several pages of lorum ipsum written in Cirth.  If you’d like an even more accurate replica of the contract, Weta’s online store has a version with hand-made touches by Mr. Reeve.

* If you have a copy, check out the larger of the two fold-outs.  Almost all of it could have come straight out of a film contract.

13 Responses to The Hobbit Contract, Part 6

  1. While the physical destruction of a contract is apparently not a legal concept, “Tearing up a contract” is an oft-used plot device in a lot of fiction. Are you saying that tearing a contract up has no effect at all? Once signed, the only way to void a contract is to write another contract which voids it? Might the act of tearing up a contract be considered a statement of a new oral contract to disregard the old one? If so, mightn’t you want a clause in your contract saying that this can’t be done in this case?

    • Are you saying that tearing a contract up has no effect at all?

      As a deliberate act of destroying evidence it may have some evidence-related effects, but it generally doesn’t have an effect on the validity of the contract.

      Once signed, the only way to void a contract is to write another contract which voids it?

      That depends. The parties can always agree to modify a contract, but the contract may say that the contract may not be modified except in writing, typically a writing signed by both parties.

      Might the act of tearing up a contract be considered a statement of a new oral contract to disregard the old one?

      Even if it were, it would be a statement by only one party (the one doing the tearing-up). The other party would have to agree.

      If so, mightn’t you want a clause in your contract saying that this can’t be done in this case?

      Maybe, but the contract already has such a provision, in that it limits modifications to those made in writing (unilaterally if made by the Company and by written agreement if made by the Burglar).

    • It’s a bit of a tangent, but tearing up a Will does revoke the will (presuming the tearing was done by the person the Will belonged to and that they did it with the intention of revoking, and that the tear at least touched a material provision, and that the Will itself does not have a clause stating that it cannot be revoked by physical act.) That could be where the idea comes from.

      It is also a pretty strong statement of rejection to tear up an offer that you have not signed yet, and I have seen that used for dramatic effect in media with contracts that were just about to be signed.

  2. What’s also interesting is that, if the film follows the book, Bilbo actually produces the contract in his negotiations with the Elvenking and Bard … he’s actually preserved that bit of paper through rainstorms, goblin attacks, spider-battles, river-rides and more. So even if the Dwarves held that the survival of the physical contract was immaterial, Mr. Baggins seemed to be taking no chances.

  3. “Are you saying that tearing a contract up has no effect at all?

    As a deliberate act of destroying evidence it may have some evidence-related effects, but it generally doesn’t have an effect on the validity of the contract.”

    Well that makes the end of Goonies a lot less happy.

    • Compare “tearing up a contract” where only one side wants out, with “tearing up a contract” where both sides have decided they want out. In the first case, tearing up the contract has no effect* (as described above). In the second case, however, it signals acceptance of a contract modification, specifically, that the contract will be dissolved at that point.

      * there are a small number of contracts which actually do allow unilateral withdrawal (partnership agreements, for example) but they are rare and a VERY close examination reveals that withdrawing from a partnership triggers “winding down”… which process is usually described in the contract.

    • If I remember right the contract in the Goonies movie was never signed (he was stopped before doing so), so tearing it up was just a dramatic way to show refusal to sign.

      • Good point. On the other hand, Elliot’s destruction of Pete’s “bill of sale” in Pete’s Dragon becomes less effective. (Except of course for that pesky Thirteenth Amendment.)

  4. ” I suspect, then, that this clause is really included for humor rather than for (fictional) legal effect.”

    It is certainly possible it was there for humor, but it is not all that weird to include unnecessary clauses in a contract just to make sure the other party knows about the fact (and documents the fact that everyone is aware of the fact as well).

  5. I haven’t watched it in so long but I thought he had signed it before they found the gems. Maybe he hadn’t finished signing it in triplicate. Even so, it doesn’t help the rest of the neighbors who have already signed their property away. Oh darn, I’ll just have to to rewatch a childhood favorite.

  6. While it is appropriate to post about The Hobbit Contract to tie into the movie, could we have a post on the Avengers Charter?

    http://marvel.wikia.com/Avengers_Charter

    Some questions could be 1) “In accordance with the tenets of national and international laws, the Avengers, acting individually or as a group, are herein authorized to function in all lands, territories, or protectorates of the United States and any member nations affiliated with the United Nations. ” I sincerely doubt if the Avengers asked all member nations affiliated with the United Nations if it was okay for, say, the Hulk to rampage across their territory. Does the original charter open the other members of the Avengers to any liability caused by the Hulk? 2) Can the Hulk legally sign anything? The Hulk signed the contract as “Hulk” and presumably this is a recognized alias of Dr. Banner but depending upon what version of the Hulk this is Dr. Banner may have no memory of signing any contract. What obligations, if any, are placed upon Dr. Banner knowing that he might not have been in his right mind when he signed? 3) If the charter is considered canon for the purposes of the movie, does it make sense based on the charter that the Avengers and by extension SHIELD would have access to nuclear weapons?

    Martin

  7. 1) “In accordance with the tenets of national and international laws, the Avengers, acting individually or as a group, are herein authorized to function in all lands, territories, or protectorates of the United States and any member nations affiliated with the United Nations. ”

    I think that’s supposed to be a waiver of immigration law, and to function as a blanket visa… not immunity for all laws.

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