Uh huh. The truth is that libertarianism will work as long as people are already largely self-policing. If people are not, then one gets a spiral toward anarchy instead of an orderly society -- which begets the proliferation of laws to try to limit those who use the letter of the law to get around the (moral) spirit of the law.
A good a non-governmental example is found in mortgage paperwork. A nice libertarian society might expect it to be one sheet of paper -- at most. Why? Well, because a good libertarian would live up to his obligations, of course.
Here in reality, your mortgage closing will have you signing something that's tens of pages long, and just about every sheet and clause has something you must or cannot do -- and just about every one of those was added because somebody tried to get away with something, instead of honoring the spirit of their agreement.
You have a bizzare and inaccurate concept of libertarianism.
Libertarianism is nothing more than a minimalist imposition of government needed for a safe society. That means....if a damn fool wants to shoot heroin, he can. He can also die, but other people should not be taxed or imposted on in a misguided effort to save the fool from himself. If a woman wants to be a whore, and if a man wants to hire her services, that's their business, not mine. Live dangerously, if you want, don't wear a seat belt (I truly appreciated the propaganda in support of this last weekend's revenue boosting efforts by the state police. Glad to see that terrorism is such a huge problem...)
No. Your example isn't very good, because people do cheat and steal and lie and no libertarian ever said that law enforcement or contracts would be unnecessary in a libertarian world.