Isabel's decision to forbid Ralph from accompanying her to the hotel was not due to a desire to humiliate him, but rather to a realization that she has been taxing his strength by taking up so much of his time since they left for London. She also realizes that she has had very little time to herself, and she looks forward to an evening alone. Shortly after she reaches her room, however, a servant informs her that Caspar Goodwood is waiting for her downstairs. Isabel is surprised and annoyed to realize that Henrietta has set her up to be alone with Caspar.
In the parlor, Caspar says that even though Isabel has asked him to spend a year apart from her, he is too miserable without her to stay away. As always, Isabel is struck by his intimidating physical presence and his aggressive demeanor. She tells him resolutely that she cannot marry him now, that she has no place for him in her life now, and that she will need at least two years to travel in Europe before she will know whether she could even consider marriage. She insists on preserving her independence, and even though Caspar says he will not threaten her independence—he even says that a married woman is more independent than a sheltered girl—she cannot quite believe him. Caspar is visibly hurt and worries that Isabel will fall in love with another man. But he reluctantly agrees to give her two years, even though she says that she does not promise to marry him even then. Caspar strides away; Isabel goes upstairs, collapses next to her bed, and buries her face in her hands.
Isabel is overcome with a curious emotion: she is nearly ecstatic with excitement at having demonstrated her independence by warding off Caspar. She thinks that it is a visible sign of her commitment to her independence. When Henrietta returns, Isabel confronts her and says that she was wrong to arrange the meeting with Caspar. Henrietta disregards Isabel's anger, saying that Isabel is acting ridiculous by allowing her romantic notions of Europe to make her forget her practical American values—she says that if Isabel marries one of her European acquaintances, Henrietta will cease to be her friend. But Henrietta says that she was motivated to arrange the meeting with Caspar by her love for Isabel.
The next morning, Henrietta says that she plans to stay in London and wait for her invitation to Lady Pensil's house—she hopes to use her experience there to gain more insight on the English aristocracy, so that her articles will be a great success in America. Ralph arrives and tells Isabel that Mr. Touchett's health is in decline. He and Isabel agree to visit a great doctor named Sir Matthew Hope that afternoon. While he waits for Isabel before their visit, Ralph talks to Henrietta, who admits to him that she arranged for Caspar to show up at the hotel without Isabel's knowledge. She says that if she really believed that Isabel would never marry Caspar, she would break off their friendship.
Isabel and Ralph arrange for Matthew Hope to go to Gardencourt and then hastily return there themselves. In the parlor, Isabel finds a middle-aged woman playing piano very beautifully. This is Madame Merle, an acquaintance of Mrs. Touchett; she seems very charming and charismatic. Isabel has tea with Madame Merle and Mrs. Touchett and learns that Madame Merle is an American, whose father was a naval officer in Europe. Matthew Hope arrives, and Mrs. Touchett excuses herself to speak to him. The news about Mr. Touchett's health is good, and Ralph is cheered enough to talk to Isabel about Madame Merle, whom he describes as a very clever, accomplished, and popular woman. He also reveals that Madame Merle's husband has been dead for many years and that she has no children.
Despite the promising news about his health, Mr. Touchett declines rapidly, and, fearing that he will soon die, asks to speak to Ralph. Mr. Touchett tells Ralph that he wants Ralph to find more direction in his life and urges him to marry Isabel. Ralph acknowledges that if he were not ill, he would be in love with Isabel but says that he could never marry her as things are. Instead, he urges his father to divide his inheritance equally with Isabel, leaving her with the vast fortune of sixty thousand pounds. This notion perplexes Mr. Touchett, who cannot fathom why Ralph would want to give up half his fortune. Ralph explains that Isabel does not understand that she does not have very much money, and he wants to protect her and to enable her to make her own life without ever having to marry for money. Mr. Touchett agrees.
Over the coming days, Isabel grows quite close to Madame Merle, who seems to be almost perfect to her—she is graceful, talented, and interesting, and her only fault seems to be that she is so much a social being that she seems to have no inner self. Madame Merle tells Isabel that Americans who live in Europe are displaced—she compares Ralph, whose illness essentially functions as a career and a lifestyle, with a man she knows in Florence, Gilbert Osmond. Osmond, she says, devotes his life to painting and raising his daughter. Isabel asks why Madame Merle seems to dislike Ralph, but Madame Merle replies that Ralph is the one to dislike her—she herself feels nothing about Ralph. Madame Merle confides in Isabel that she feels as though her life has been a failure, because she has no family and no fortune. She says that a person is defined by what she possesses. Isabel disagrees, but when Madame Merle departs Gardencourt, she and Isabel bid farewell as close friends.
Isabel continues corresponding with Henrietta, whose promised invitation to Lady Pensil's manor never materializes. Henrietta now hopes to travel to Paris with Mr. Bantling. Not long after Madame Merle leaves, Isabel is reading in the library, when Ralph enters with an unhappy piece of news: Mr. Touchett has died.
This section involves three important narrative events: Isabel's second rejection of Caspar Goodwood, the introduction of Madame Merle, and the death of Mr. Touchett, which unexpectedly brings Isabel a fortune. The scene with Caspar is interesting for two reasons. First, it reveals what happened in the conversation Isabel had with Caspar before she left for Europe, which James chose to skip over in the opening chapters of the book. Isabel asked Caspar to give her a year in Europe before deciding whether or not to marry him. Now, though it has not been a year since Isabel left Albany, Caspar is impatient for an answer and desperate to be with her. As intimidatingly masculine as Isabel seems to find Caspar, he is also extremely devoted to her and seems to need her presence in order to be happy. Ironically, his rash decision to follow her to Europe rather than waiting a year to see her is rewarded by her forcing him to agree to wait two years before she will even consider the question of whether or not to marry him.
The second interesting feature of the Caspar scene in Chapter 16 is that it provides Isabel another opportunity to defend her independence from a suitor's desire to marry her. She has already rejected Caspar once and then rejected Lord Warburton, but where those past experiences left her feeling confused or sad, this one leaves her feeling exultant and powerful, as though a weight has been lifted from her shoulders. Though Isabel (or James) is never entirely clear about what "independence" means to her exactly, clearly it implies a kind of personal autonomy that would be incompatible with a conventional marriage, in which the wife is expected to be submissive to her husband. By warding off three successive proposals, Isabel has demonstrated her commitment to her personal autonomy, even if she has only a vague idea of what she wants to do with her life.
Madame Merle will soon become an important and sinister character in Portrait of a Lady, and will play an enormous role in Isabel's life by manipulating her into marrying Gilbert Osmond and thereby losing her treasured independence. But in this section, Madame Merle is more an enigma than a villain. Isabel likes her very much, and the redoubtable Mrs. Touchett thinks the world of her. But Ralph, whose opinions the reader instinctively values, does not like her, and this makes it natural to look for her flaws. If the novel explores the opposition between personal independence and social propriety, Madame Merle seems to exist uneasily between the two polarities.
On the one hand, she is an independent woman, accomplished in every grace and extremely popular; she clearly makes her own decisions. But on the other hand, her commitment to popularity means that she seems to observe every social convention; Isabel thinks that she even seems to lack an inner self. In this regard, Merle is Isabel's first introduction to continental Europe—throughout the novel, America represents individualism, Europe represents social convention, and England seems halfway in between. Isabel has moved from America to England, and now has a taste of what she will find in Europe.
In a sense, at this stage of the novel, Madame Merle represents the complete sacrifice of individualism to society: no one has taken her independence from her, but she has chosen not to exercise it in any meaningful way. Though Isabel is very attached to her by the time she leaves Gardencourt, the reader rightly looks upon their new friendship with a sense of suspicion and disapproval.
The death of the admirable Mr. Touchett changes Isabel's life by bringing her a vast fortune. True to his desire to live vicariously through Isabel, Ralph has arranged with his father to split the money that would have otherwise all gone to Ralph between Ralph and Isabel. At this stage of the novel, this would appear to be a wonderful development for Isabel: as Ralph observes, it will preserve her independence and protect her from having to marry for money. She will be able to lead her own life, which is what Ralph most dearly wants her to do.
As the book progresses, however, the consequences of Isabel's inheritance become worse and worse, and Ralph's decision becomes more and more tragically ironic. In effect, it is Ralph's desire for Isabel to be independent that leads to Isabel's inheriting a fortune, and Isabel's wealth that prompts Madame Merle to scheme to marry Isabel to Gilbert Osmond, ruining any hope of independence that Isabel might have had.