Of Hobbits and Contracts

The other night, I finally got to see The Hobbit:  An Unexpected Journey.  Having recently spent several months in New Zealand (the home of Peter Jackson’s Weta studio), I had been surrounded by Hobbit-mania and was interested to see whether the movie proved worthy of the hype.  I wasn’t disappointed.  Although some critics were, well, critical, I thought it was an extremely entertaining movie that made time fly.  Making a highly entertaining movie even better, a lengthy contract played a pivotal role.  When Gandalf the Wizard, and Thorin and his company of dwarves seek Bilbo Baggins’ (i.e. the aforesaid hobbit’s) assistance to accompany them as burglar on an unexpected journey, they first ask him to sign a contract.  The contract, several pages long, outlines in detail his compensation (i.e. consideration) and contains warnings and numerous disclaimers of liability in favor of Thorin & Co.  Being a wise hobbit, Bilbo actually reads the contract, faints, and then refuses to sign it. The next morning, he awakens to a quiet house (dwarves know how to party, but apparently do so responsibly). Bilbo has a change of heart, decides he does want excitement and adventure, signs the contract, picks it up, and runs out of his house to join the departing dwarves.  This is where --for a contracts prof -- the tension is most high.  Having rejected the terms of the contract the night before, we know that the hobbit no longer has the power of acceptance.  Therefore, when Bilbo thrusts his signed contract into the hands of one of the dwarves, he is only making an offer.  It is the dwarf (who apparently has authority to accept on behalf of the other dwarves) who has the power of acceptance.  I don’t think I need a spoiler alert before revealing that they do accept (there wouldn’t be much of a movie if they didn’t). 

There were so many things to like about the movie, not the least of which was the way it illustrated how relational contracts set expectations, shape relationships and establish trust. At one point, Bilbo seeks to desert the dwarves. Although one could argue changed circumstances, I think a better explanation would be that given Thorin’s disparaging comments about Bilbo’s suitability for the journey, Bilbo decides to adjust his performance obligations accordingly.  But events (and the always fascinating Gollum) intervene.  In the end, Bilbo carries out his contractual obligations, proving that - even in Middle Earth - contracts are alive and well.

[Nancy Kim]