IN CARY FAGAN`s short stones, collected in History Lessons (Hounslow, 164 pages, $14.95 paper), characters continually misinterpret both the feelings of those around them and the dangers of their environment, with sometimes disastrous consequences. This is most evident in "The Village Angel," a Bernard Malamud-like account of an old man`s involvement with an experimental theatre troupe in New York City. Although engagingly written, the impact of the story is dissipated by an ending that, apparently aiming for transcendent lyricism, is coyly noncommittal. In "Happy Birthday to Me," the delay in the arrival of Bobby - the guest of honour at a surprise birthday party - precipitates an eruption of latent hostility. The degeneration of the guests` behaviour from compliance to anarchy, and Bobby`s obliviousness to the depths of rancour he has unintentionally tapped, provide the story with its poignant humour. In spite of Fagan`s occasional missteps (the question of a revered older brother`s implied homosexuality is left maddeningly unresolved at the conclusion of the title story), History Lessons is, over all, a strongly written, worthwhile effort.