The New York Knicks gave the Washington Bullets a lesson in their own game of defense tonight, dominating them, 98-77, at Madison Square Garden.

"They were calling out our plays and getting to the spots we wanted quicker than we were," said Washington forward Greg Ballard. "They made everything we tried come hard and we kept making mistake after mistake."

The Knicks went into the game as the top defensive team in the National Basketball Association, yielding 97.4 points a game; the Bullets were second, giving up 98.3. But the Knicks seemed to disrupt the Bullets while the Bullets seemed to have little effect on what New York wanted to do.

The 77 points the Bullets scored equaled their season low and their 3/ percent shooting was their poorest of the season.

It was also their worst defeat since they lost to the Los Angeles Lakers by 30 points, Nov. 18.

The Bullets scored the game's first two points on a jump shot by Ballard, but the Knicks responded with 10 straight points and weren't threatened thereafter.

"To the man, we had a bad performance," said Coach Gene Shue. "We were outplayed everywhere."

Bernard King led New York with 31 points on 11-of-18 shooting from the field and he also had seven rebounds and five steals. Other Knicks in double figures were center Bill Cartwright with 14, 10 in the first quarter, and reserve guard Paul Westphal with 13.

Jeff Ruland was high scorer for Washington with 19.

The Bullets had only 10 players dressed because starting forward Spencer Haywood had his eyes dilated during an examination earlier in the day and was advised by a doctor not to play. Haywood injured his right eye last Tuesday when he ran into Carlos Terry at practice. He played against Milwaukee Wednesday, but complained of having trouble with the eye at practice Friday.

Rookie Dave Batton started in Haywood's spot, but missed a shot and was called for two fouls in the first two minutes. Shue brought in Ruland.

Ruland scored eight of Washington's first 15 points, but it did little to slow the Knicks. New York, pressing full court from the outset, led, 34-21, at the end of the first quarter and 57-38 at halftime.

The Bullets shot only 32 percent in the first half.

"We had 23 fast breaks in the first half and we outrebounded them by 16 at the half," said New York Coach Hubie Brown, "and I thought they got down on themselves. But you have to remember, they were without two guys in the back court," referring to injured guards Frank Johnson and Don Collins.

"When things aren't going good is when the injury factor really comes in," said Shue. "When things are going bad, you have to be able to juggle your lineup, but when I juggled it tonight, nothing happened. No one could generate anything."

The Bullets cut the lead to 68-55 after baskets by Ballard and Rick Mahorn (his only points of the game) with 3 1/2 minutes left in the third quarter. But they turned over the ball on their next four possessions and the Knicks turned them into nine points, four of them by King.

The Knicks led by as many as 25 points late in the final period, and the Bullets reached 77 only because of Charles Davis' three-point shot in the final 20 seconds.

The Knicks learned before the game that forward Sly Williams will undergo arthroscopic surgery on his left knee Sunday and will be out three to four weeks. Williams had beaten out former Bullet Truck Robinson at the power forward spot until the injury three games ago.

Robinson made only four of 14 shots, but led the Knicks with 15 rebounds.