Retiring for the night, the Disinherited Knight is swarmed by squires and pages eager to discover what Prince John could not—his identity. The knight, however, declines their offers of service and relies only on his own attendant, a "clownish" character half smothered in furs that obscure his identity as well.

He has won not only the tournament but also the horses and armor of the knights he defeated. These arrive with the squires of the defeated knights, who wish to know whether he intends to keep the prizes or exercise the option of allowing the knights to random them back.

To four of the squires, the Disinherited Knight declares that the prizes belong with their "valiant masters," and that being truly disinherited, he would much prefer the ransom money. He generously returns half the payment to each of the squires and entrusts them to divide the money among themselves and their fellow attendants.

To the squire of Sir Brian, he replies that he cannot accept the prize or the ransom until they are able to settle their quarrel in mortal combat. The squire objects that Sir Brian would never accept the return of the horse or armor, which would be unchivalrous. The knight therefore declares that if Sir Brian refuses them, the squire may keep them.

When the squires are gone, the knight addresses his attendant, who turns out to be Gurth the swineherd. Gurth is enjoying masquerading as a Norman squire-at-arms and is amused to have been close to Cedric without being recognized, but he fears being discovered. The knight tips him ten gold pieces, and the swineherd suddenly finds himself rich by his own standard. The knight then orders Gurth to take the ransom money to Isaac in the village of Ashby and allow Isaac to reimburse himself for the borrowed horse and armor. 

Gurth objects that Isaac will take advantage and that it wouldn't be right to allow a Jew to enrich himself at the expense of a Christian. The knight, however, insists, and Gurth goes on his errand, plotting to outfox his master's creditor.

In Ashby, Rebecca watches her father pace and fret over the humiliation of the day. He is galled at the cruelty of being unable to retaliate. Rebecca advises him not to think about it, and she reminds him that the English are dependent on the Jews, pointing out the irony of the festival having been financed by Jews. Isaac laments that in providing the Disinherited Knight with his horse and armor, he has suffered a large financial loss. He thinks highly of the knight but does not believe that he will feel any obligation to pay a debt to a Jew.

Gurth arrives to tell Isaac that the horse has been returned safely to its stable and that he is commissioned to pay for the armor. Isaac offers Gurth a glass of expensive wine, which produces a coarse exclamation from the swineherd. A comic negotiation follows in which Gurth pretends that the money bag he carries is full of crossbow bolts and that he has brought very little money with him. Isaac, knowing better, is torn between driving a hard bargain and being liberal in return for the knight's honesty. After some haggling over the condition of the horse, Isaac sets a fair price (although he fails to tip Gurth) and Gurth is satisfied that he has saved a full half of his master's winnings.

Rebecca, who slipped out during the negotiations, meets Gurth downstairs and tells him that her father was only joking about taking the money. She gives him a bag of money to restore what he had paid to Isaac, instructing Gurth to keep the change for himself and to be careful going through the village. Gurth goes from the heavily fortified house into the dark streets, thinking happily that with the money he has earned that day he almost has enough to buy his freedom.