King Richard is in foreign captivity. In the absence of the king, Prince John is consolidating power and attracting to his court the more decadent and vicious of English nobility. The forests are full of outlaws, the economy is in shambles, disease is rampant. A tournament of skilled knights, therefore, provides English people of all classes some much needed entertainment.

The Passage of Arms, held at Ashby in Leicester, is a first-class tournament drawing a massive crowd that includes Prince John himself. The top-ranked contenders are Cedric's kinsman Athelstane and his Norman neighbors Reginald Front-de-Beouf and Philipe de Malvoisin, as well as Sir Brian de Bois-Guilbert.

In the place of highest honor is John's seat, and opposite to it is the place reserved for the Queen of Love and Beauty. The galleries are arranged by rank so that disputes among spectators jostling for the best seats are settled by men-at-arms and marshals of the field.

Isaac of York, no longer masquerading as a poor man, is now dressed in luxurious clothes and accompanied by his daughter. He is aiming for an advantageous pair of seats and is challenged by an impoverished Norman gentleman, who is quickly supported by bystanders.

Isaac's position is much different from when he was forced to beg shelter from Cedric, because here he is somewhat protected by many influential people who need access to his money and don't dare alienate him. His daughter Rebecca is also richly dressed and dripping in expensive jewelry. Her beauty attracts the eye of Prince John and the jealousy of women in the crowd, who envy her as much as they despise her.

Prior Aymer reminds the prince that while Rebecca may be beautiful, she is religiously speaking off limits. John brushes off the warning, noting that he has a little problem with greed, too, which is generally overlooked.

John declares that his "Prince of supplies" and Rebecca will have seats among the privileged and calls to Athelstane's party to make room for them. John is obviously well acquainted with Isaac and depends on his good will for funding his ambitions.

Athelstane, called by his friends the Unready because of his tendency toward delayed reaction, simply stares at John, which the prince takes for Saxon impertinence. John orders one of his mercenary attendants to poke Athelstane with a lance, but Cedric lops the lance's point off with his sword. The crowd, siding with a noble—even a Saxon one—against the unpopular John and Isaac, applauds Cedric.

John rolls his eyes at the discontent and chides a nearby archer, whose wit and composure easily outmatches John's. The prince irritably orders the Saxons to make room for Isaac, but Isaac self-deprecatingly declines to sit with the Saxons. Finally venting his anger on Isaac, he orders him and Rebecca to sit where they are told, while Cedric prepares to prevent it.

Wamba leaps between Cedric and Isaac and clowns with a shield of meat and a wooden sword, knocking Isaac down, thus saving Cedric, amusing John, and appeasing the crowd. John casually demands some loose change from Isaac to tip Wamba, then as Isaac fumbles with his purse—afraid to refuse but unwilling to comply—John snatches it from him and tosses two gold coins to the jester. The crowd applauds "as if he had done some honest and honourable action."