I don't hate this idea, and I don't think it is against the rules. The serious consequences of a total defeat can be reworked when it is dramatically appropriate. I tend to prefer that the framework of a contest is set out before dice are rolled and points are spent ("He's trying to take the Chalice from you, what are you doing?" etc).
This might be a bit "indie-rpg" for some people, but I think that characters involved in contests can have slightly different goals (e.g. "What are you trying to do in the battle: (a) drive them off (b) take prisoners (c) kill as many as you can").
-- John Machin "Nothing is more beautiful than to know the All." - Athanasius Kircher, 'The Great Art of Knowledge'.
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