Clever idea.  Hard to go wrong with drunken fools in a mudpit.  One thing misses, and just a bit at that.  The ending is too hurried.  Leave something to the imagination of your readers, especially given the brevity of the story.   When the punch line hits them, it will be all the more funny, as they have brought something along with them.  You, as the writer, are the guide on this journey, your audience will provide the rest.

  So, just leave out Stuf's explicit explanation of the truth.  Expand the story and reveal those tidbits about the truth obliquely.

  I did appreciate the collective 'ummmmm' moment at the end though.  

  As a side note, there were a great many spelling and grammatical errors (capitalization, space/punctuation relationships, etc.), don't underestimate the importance of presenting somewhat polished work, and your readers can focus more acutely on commenting on the content.

 The beginning was a great hook. It set up a background, history, and tradition making the even seem very real. A reader can buy into almost anything if they think it has been around awhile accomplishing the "test of time" so to speak.

    The ritual of the Liars Tale is quite simple, one man, known as a Teller, starts some short tale of an event he, may or may not, had done during the previous month or year, embellishing it significantly to make himself sound more important. The man to his right then insults the original Teller, and then elaborates as to how he was really there, and how he was the real hero of the story. This continues till it comes full circle, then the whole chain starts over,

This tidbit was pure genious. Other than a few punctuation errors and possibly a bit of comma overload, this was a great way to describe the ritual. It is understandable, but yet still as disarrayed as the event itself. It is logical, yet undenyably overcomplicated ~ again like the event itself. I loved it.

The whole event goes on for as long as it can. The only way to win the competition is to be the last man standing. As the lies grow bigger and grander, the audience, sometimes referred to as the Watchers, begins to disbelieve them. After each man's tale, if the watchers feel that the story is just too unbelievable, he is jeered and laughed at. In some cases, Watchers who feel like they have been told a particularly unbelievable lie, throw pieces of food, stone or whatever happens to be handy. This, if anything, has proven to influence the qualities of lies told by the Tellers, and also where they the events where held.. Trud the Black learned this when, at his Liars Tale, which, due to a rainstorm took place inside a large barn, he spent the remainder of the event being pelted with horse manure after a quite unbelievable lie.

Here, you reinforce the fact that it has withstood the "test of time" and the strategy keeps the readers attention. They truly want to know about the watchers and how to win the contest. My only contention is that you truly do not define how a winner is picked. All we get is "the last one standing". Is this because everyone else gets pelted until they give up? Or do the contestants succumb to exhaustion? This could be fleshed out a little and maybe give room for another witty antedote on how final winner is picked.

The event started normally Engli, Loyt, and Kodra all knew the rules of the event, and had all prepared to tell tall tales. Stuf was a lowly mud farmer and had not been privileged to spending his days dreaming up made up stories to tell around the fire. When it came to his turn he honestly told a tale of three drunken men thrashing about in his field, damaging his property. The Watcheres jeered him, but in his defense, it turned out that the three men thrashing about in his field where the three other contestants, only they were drunk. It had turned out that all of their tales where just drunken hallucinations.

This is where you lost me. It was at this point, for some reason I am not quite sure of, I checked to see how much longer the story was and skipped to the last paragraph. It was only after reading the last paragraph I thought maybe I missed something here. I think this particular paragraph is missing your witty charm and elocution. However, the 2nd rule being near a proverb ending made it very good.

I would suggest somehow taking a second look at the truth-teller tale. I think there is something grand missing, but something which only your style and voice can find buried there. I will be looking forward to reading more of your work.

Although the work does need some editing, it seems like a good idea although you rushed it a little.

Hey Torq,

I love the premise here.  Storytelling as storytelling device is always a fun meta- way to get a story going.  I enjoy that you have written out all these detailed rules for this fictional ceremony.  The attention to detail keeps my interest.  I will say that I think you have missed the tale here, though.  This reads more like a non-fiction article on a fictional idea.  That doesn't mean it's not enjoyable, but that is certainly more of a niche audience than you may be going for.  Usually, people only like reading that kind of info if it relates back to a story they already love (the countless LOTR guides, atlases and handbooks come to mind).

On to the details:

Every so often in the village of Soknheim, the men gather together to revel in the art of Thyrmjamal: The Liars Tale. The ceremony of the Liars Tale is, as far as they know, exclusive to Soknhiem. Four men are chosen, usually with little discrimination as to who, though several historical tablets tell of events where the appointed chooser chose only his family and friends, creating somewhat of a longstanding dynasty of Liars. Though, As if the nature of the Liars Tale, some believe this was just a lie told at one of the events.

Strong intro here.  The reference to historical tablets creates a nice impression of importance.  I do question the inclusion of the rules for choosing in this first paragraph.  It doesn't serve any purpose here as it is never referenced again.  The first paragraph should be all necessary info.  Save the tidbits for later on.

I'll skip the next two paragraphs except to say it is all strong well thought out details.

Over the course of it’s, the Liars Tale has changed its rules many a time. Most of these rules were implanted by the Watchers. To date there are only two rules to which the Liars Tale is governed by:

This is a little confusing.  Are there many, constantly changing rules or are there only two.  You already seem to have established more than two in the piece so far.  I guess what your trying to say is that there are two that must always be in place.  Also that last sentence should read: "To date there are only two rules to by which the Liars' Tale is governed:"

One of the bigger debates of those who participate in the Liars Tale, is what to do with people who tell the truth? If the whole point of the event is tell a lie that is just a hair shy of unbelievable, then telling the truth is clearly unallowable. What then do you do with people who don’t know they are telling the truth? This very issue came up in the Liars Tale of Engli-Loyt-Kodra-Stuf.

I don't quite see how the following paragraph does this.  Stuf clearly knows he is telling the truth.  He just doesn't understand the rules of the game. 

Stuf was a lowly mud farmer and had not been privileged to spending his days dreaming up made up stories to tell around the fire.

Is there really such a thing as a mud farmer?  It seems kind of made up just to be funny, which throws off the authenticity of the rest of the piece.

When it came to his turn he honestly told a tale of three drunken men thrashing about in his field, damaging his property. The Watcheres jeered him, but in his defense, it turned out that the three men thrashing about in his field where the three other contestants, only they were drunk. It had turned out that all of their tales where just drunken hallucinations.

This to me is your whole story.  What if instead of starting off with all the rules you told it as a story with these four men sitting in a muddy meeting hall?  You start off right away with Engli's story and as he tells it the narrator explains the rules and whats going on and why it's important.  Then comes Loyt to up the ante and retell the story bigger and stronger than before.  All the while Stuf is sitting nervously not sure what is expected of him and hinting through his actions that he is not fond of his fellow competitors.  Then in the end we get his story and the new rule of the Liars' Tale.  You can still include all the great details you've developed, but at the same time we can get more involved with the game through a closer P.O.V.

Anyway, those are my thoughts.  I can really see this being part of a bigger tale (if you will).  This seems like just the kind of authentic detail that can make fantasy stories so fun.  Thanks for sharing it.

-Ben