quoggy:

Bilbo’s Contract

I’m a lawyer and a hobbit nerd, so Bilbo’s contract with Thorin’s Company is one of my favorite parts of The Hobbit: both in the movie and in the book. The book version is short and sweet, but the movie version has enough substance for me to really sink my teeth into. You can read it in its entirety here. It’s full of fun bits of legalese and boilerplate; some lawyer clearly had a lot of fun writing this thing. But the contract doesn’t just serve as a bit of visual humor. Bilbo’s one-fourteenth share of the treasure is actually an important plot point later on down the road. We’ll get to that later.

Is this a good contract? It’s impossible to know for certain, because I don’t know the legal system of the Shire, or of Middle Earth. I don’t even know if they use common law or rely on precedent at all. But the Shire has sheriffs and mayors, and the language of the contract itself implies a legal system very similar to our own. So I’m going to make some assumptions, here, and proceed with my analysis as if this contract obeyed the basic rules of contract law.

A contract is an agreement between competent parties, with lawful consideration, to do, or abstain from doing, some act. Consideration is an important piece of legalese, which means that each party must gain something of value from the contract. The exchange here is simple: Bilbo agrees to act as the Company’s burglar, in exchange for a share of the treasure. There’s an offer and acceptance, and there’s consideration. But is it lawful consideration?

A contract can be found unenforceable for a host of reasons. If one of the parties signed into it fraudulently or under duress, for example, or if they’re otherwise not considered competent parties. Contracts also cannot be made for illegal actions. An illegal contract is one made for illegal purposes, and it cannot be enforced in a court of law. This is important because Bilbo’s obligations per Thorin’s contract is clearly labeled: he is the company’s burglar.

A burglar is one who commits burglary. He burgles. Burglary is usually defined as the breaking and entering of the house of another (usually at night) with the intention to commit a felony. In other words: it’s illegal! That makes Bilbo’s contract unenforceable, right?

Well, not exactly. While the contract does refer to Bilbo Baggins as “the Burglar,” it doesn’t actually require him to act as a burglar. In fact, his duties are spelled out quite explicitly:

Burglar shall devise means and methods to circumvent any difficulties arising from any illegal or illicit occupation or guardianship of Company’s righted home and property. Successful disposal of any such guardian, creature or squatter in said home shall not necessarily earn any additional monetary or fiscal reward, but will definitely guarantee Burglar [if he survives] and Burglar’s family the undying gratitude and promise of service in perpetuity and forever of the Company and its successors.

Nothing illegal there. So if the contract doesn’t require Bilbo to do anything illegal, it’s not unenforceable. I wouldn’t have used the word “burglar,” myself, to avoid the ambiguity in the first place, but I’m not a dwarf attorney. Dwarf Law is different, I guess, I don’t know.

Now that we’ve established that the contract is a valid one, let’s move on to the important part: Bilbo’s share. Near the end of the adventure, Bilbo steals the Arkenstone, the source of Thorin’s greed and obsession, and uses it as a bargaining tool. It’s clear that Thorin values the Arkenstone above all else. Bilbo, the clever little Hobbit that he is, calls it his one-fourteenth share of the treasure in an attempt to legitimize his taking of the stone. Gandalf even smirks at Bilbo’s quick thinking, seemingly in approval. But he’s a wizard, not a lawyer.

I’m going to ignore the valuation of the Arkenstone; it’s impossible to tell if it’s actually worth 1/14th of the treasure, or less, or more, so let’s just assume for the sake of argument that it is worth exactly 1/14th. That means, per Bilbo’s contract, he’s entitled to take it for his share of the treasure, right? Wrong. Bilbo is in violation of the contract.

Bilbo’s share of the treasure, like his duty as a “burglar,” is explicitly defined. Here are the relevant parts of the contract:

Cash on delivery, up to and not exceeding one fourteenth of the total profit [if any]. Not including any of the gross paid to other parties in lieu of royalties or help and provisions given or loaned.

And in the margins:

Burglar acknowledges and agrees that each item of the Company’s valuables, goods, money or merchandise which he recovers from the Lonely Mountain [the ‘Recovered Goods’] during the term of his engagement with the Company, shall remain the Property of the Company at all times, and in all respects, without limitation.

Furthermore, the company shall retain any and all Recovered Goods until such a time as a full and final reckoning can be made, from which the Total Profits can then be established.  Then, and only then, will the Burglar’s fourteenth share be calculated and decided.

See? Bilbo doesn’t get to pick and choose what he gets out of the treasure. He gets paid in cool, hard cash valued at one-fourteenth of the total value of the treasure. He doesn’t get to take home any goblets, or scepters, or gemstones, unless that is specifically how his share is calculated. In fact, the items of Smaug’s hoard (and in the rest of the Lonely Mountain) remain the property of the Company. Every item.

Bilbo doesn’t have any right to the Arkenstone. He has, at best, the right to gold of the same value as the Arkenstone. Meaning he stole the Arkenstone, criminally, from its rightful owners: the Company. Bilbo is therefore in breach of contract, and Thorin now has a case to cut the hobbit out, entirely. Not to mention a civil suit for conversion.

Not that it mattered, in the end. The problem was resolved with swords and arrows, not skillfully crafted judicial arguments in a court of law. However, Bilbo nonetheless violated the Prime Directive of signing a contract, a rule I hammer over and over into my friends and family’s heads every chance I get: always talk to a lawyer.