During the Civil War, it was common practice to execute any enemy who was caught performing hostile action while out of uniform. This often applied to spies and saboteurs. Ambrose Bierce uses this historical fact to build his short story "An Occurrence at Owl Creek Bridge."

As far as Peyton Farquhar is concerned, he is captured by Union soldiers while attempting to destroy a bridge. Farquhar is not a Confederate soldier. Instead, he is a relatively well-off and influential civilian who decided to take part in the war by burning a bridge necessary to facilitate the Union's advancement through the South. Bierce seems intentionally vague as to why his protagonist remained a civilian instead of enlisting in the Confederate army.

Farquhar does not come up with the plan to sabotage the bridge on his own. The idea is actually planted in his mind by a Union scout masquerading as a Confederate soldier. The scout even warns Farquhar of the risks. He tells Farquhar that the Union commander has issued orders that any captured saboteurs be summarily executed, presumably as a warning to other potential saboteurs. This just seems to provoke Farquhar into action by playing into his sense of pride.

In Section II of "An Occurrence at Owl Creek Bridge," the scout who is posing as a Confederate soldier tells Peyton Farquhar:

"The commandant has issued an order, which is posted everywhere, declaring that any civilian caught interfering with the railroad, its bridges, tunnels, or trains will be summarily hanged. I saw the order."

The Union officers know they are in enemy territory. There were many Southern civilians like Farquhar who were trying to help the Confederate cause by committing sabotage or even bushwhacking Union troops. That is why the order is posted everywhere. The South was a huge place and the Union forces were surrounded by hostile civilians. The commandant posted the order quoted by the scout because he had good reason to fear attacks from self-appointed guerrillas, all of whom owned rifles and hated the invaders.

Peyton Farquhar just happened to be one of the Southern activists who got caught. He was hanged from the bridge mainly to set an example. No doubt his body was left hanging for a long time, so that other Southerners would see it and be frightened. A hanging body sends an eloquent message. 

In Ambrose Bierce's short story, "An Occurrence at Owl Creek Bridge," Peyton Farquhar is a pillar of the American South, which, during the period in question, the Civil War, can be roughly translated to mean a wealthy, upstanding citizen of the Confederacy, and an opponent of the abolitionist movement. Early in his story, Bierce provides the following description of his protagonist who, in the story's opening passages, is about to be executed by hanging:

"The man who was engaged in being hanged was apparently about thirty-five years of age. He was a civilian, if one might judge from his habit, which was that of a planter. . .Evidently this was no vulgar assassin."

Bierce goes on to expand upon his description of Peyton Farquhar, noting that this figure "was a well to do planter, of an old and highly respected Alabama family," and that, being "a slave owner and like other slave owners a politician, he was naturally an original secessionist and ardently devoted to the Southern cause." Bierce notes that Farquhar envisioned himself at one point as a soldier in the cause of the Confederacy, but one whose martial interests were impeded for reasons that are extraneous to the narrative.

In section II of his story, Bierce provides background to explain Farquhar's predicament as referenced in the narrative's opening passages, describing the main protagonist's encounter with a grey-clad soldier, presumably a Confederate soldier fighting on the same side of this conflict as that to which Farquhar's sympathies lie. It is soon revealed, however, that this grey-clad soldier is with the Union and has essentially set-up the well-to-do southerner as a presumed saboteur. The "Federal scout" does this by planting in the mind of Farquhar the suggestion of setting fire to the Owl Creek bridge, a key structure important to the movement of Union troops as they advance across the South:

The soldier reflected. "I was there a month ago," he replied. "I observed that the flood of last winter had lodged a great quantity of driftwood against the wooden pier at this end of the bridge. It is now dry and would burn like tinder."

The answer to the question -- why was Peyton Farquhar hanged -- lies in this suggestion cynically offered by the Federal spy. Farquhar takes the bait, so to speak, and attempts to burn the bridge to prevent its exploitation by northern soldiers. 

Peyton Farquhar is a man with a strong feeling of allegiance toward the Confederate cause but, due to his "imperious nature", refuses to go through the proper route of joining the military. It is partly this trait  that makes him a somewhat less likeable character, and for this reason, the reader may feel as if he is deserving of his ultimate fate.

Not knowing anything about military discipline, or about rules of engagement, Farquhar chooses to act as a vigilante by acting on his own accord. He is fooled by a Union soldier into going on their own to burn a bridge that would have blocked the northerners to get through. He got caught as a result, and processed as it is customary: death by hanging.

Perhaps it is the fact that he is a wealthy southerner that has always had things go his way what made him presume that he was above everyone else and should take matters into his own hands. Ultimately, Peyton is not meant to be neither a hero nor a villain, but another consequence of the brutal nature of war.

In the Ambrose Bierce short story "An Occurrence at Owl Creek Bridge," the main character Peyton Farquhar is about to be hanged from a railroad bridge in Alabama. But when he steps between the planks, the rope breaks and he tumbles into the river below. Or does he? We know that Farquar is a wealthy Alabama plantation owner who has attempted to set fire to the Owl Creek Bridge, but before he can do so, he is caught and tried as a spy. He is sentenced to be hanged, but it appears to the reader that Farquar has escaped and returned home to his family. Only in the last sentence of the story does the reader find that

"Peyton Farquar was dead; his body, with a broken neck, swung gently from side to side beneath the timbers of the Owl Creek bridge."

Farquhar was unable to participate in the war for causes that Bierce does not explain. His lack of action, along with the trick of the Federal scout goad his pride into trying to burn the bridge before the Union Army can advance further. I believe the threat of being hanged for trying this provokes his pride further to try it. It would be his chance to lay his life on the line for the cause he believes in. The scout used pride as bait to lure out any meddling southern citizens.

Remember, this story is about how individuals interpret the The mind sees what it wants to. Of all the sensory input he contorts throughout the story it first starts with the scout. He believed that he was encountering a chance to prove his worth and dedication to the cause. Instead he is duped by a spy seeking to expose partisans.

Farquhar is a loyal Southerner during the Civil War. He is tricked by a Union scout masquerading as a Confederate soldier into believing he could stop a Yankee advance into Southern territory by destroying the railroad bridge at Owl Creek.  When he attempts to do this, he is captured by the Union Army and sentenced to hang.  

In Part II of "An Occurrence at Owl Creek Bridge" the Union scout posing as a Confederate soldier tells Peyton Farquhar:

The commandant has issued an order, which is posted everywhere, declaring that any civilian caught interfering with the railroad, its bridges, tunnels, or trains will be summarily hanged.

"Summarily" means without delay, without the customary formalities such as a trial. Peyton is caught red-handed trying to set fire to the Owl Creek Bridge. His capture is not described in the text, but the reader can imagine the scene. One of the reasons the reader can imagine the capture scene so vividly is that Ambrose Bierce has already described it in considerable detail in Part I.

When Farquhar is talking to the Union scout he asks him:

"Suppose a man--a civilian and student of hanging--should elude the picket post and perhaps get the better of the sentinel," said Farquhar, smiling, "what could he accomplish?" 

This shows that he has a strong intention to set fire to the accumulated dry driftwood under the bridge. He might even be thinking about killing the sentinel. Then at the very end of Part II, the reader comes to the ominous lines:

The lady had now brought the water, which the soldier drank. He thanked her ceremoniously, bowed to her husband and rode away. An hour later, after nightfall, he repassed the plantation, going northward in the direction from which he had come. He was a Federal scout.

The reader can visualize Farquhar leaving his horse hitched to a tree and sneaking up to the bridge with a big can of kerosene and some kitchen matches. There are soldiers waiting for him in the dark because their officers have been warned to expect him. Suddenly the scene lights up as the soldiers uncover their dark lanterns. Peyton Farquhar is carrying all the evidence his captors need to convict him of arson. He will be "summarily hanged" the next morning. This is how Part I of the story opens.

A man stood upon a railroad bridge in northern Alabama, looking down into the swift water twenty feet below. The man's hands were behind his back, the wrists bound with a cord. A rope closely encircled his neck. 

When Farquhar walks into the trap, the reader can not only imagine the silent scene with the Union soldiers waiting in the dark and posted in various places near the bridge to forestall any escape, but the reader can even imagine Farquhar's feelings when he realizes he has lost his life, his family, his home, his plantation--everything.

Then Ambrose Bierce, the notorious cynic, plays a sadistic trick on the reader. For a long while it looks as if Farquhar is going to make a miraculous escape. The contrast between most of Part III and the hanging scene in Part I is exhilarating. The reader has been standing in Farquhar's boots waiting to fall to his death, and suddenly it seems as if this is not a story about a man being hanged but about a man escaping that terrible fate. But there is no escape after all. This is realism, not romanticism.