Henry and Margaret, Gloucester, Suffolk, Buckingham, and Beaufort enter a court of justice, followed by the Duchess, the Witch, Hume, and Bolingbroke. Then, York enters with Salisbury and Warwick. Henry condemns the Witch, Bolingbroke, and Hume to be executed. He orders the Duchess to endure three days of penance in the streets of the city and then to be banished to the Isle of Man. Gloucester seconds the king's commands, and the Duchess is led off. Gloucester is saddened and asks if he may leave the court. The king asks for Gloucester's staff, promises to be his protector, and tells him to go in peace. Margaret less kindly demands the staff, telling Gloucester that he need not be protector now that Henry is old enough to rule. Gloucester lays the staff at the king's feet and takes his leave, saying that he hopes peace will come to the throne after he dies.
Margaret picks up the staff and gives it to Henry. York announces it is the day for the combat of Peter and Horner. York says he has never seen anyone less prepared to fight than Peter. The two men enter, Horner drinking so much that he staggers, while both carry staffs with sandbags tied to the ends. Several men offer drinks to Horner, who readily accepts, but Peter refuses all such offers. The two men fight, and Peter beats Horner, killing him. The king declares that the death of Horner shows he was a traitor.
Gloucester and his men, in mourning clothes, wait in the street for the Duchess to pass by while performing her penance. She enters, barefoot, holding a candle, with her crimes written on papers and pinned to her back. The Duchess tells Gloucester how the multitude stares at her with hateful eyes, but Gloucester tells her to stay patient. The Duchess says she thinks she shouldn't be thus punished as the wife to the protector and asks him how she shall bear the shame. She says Gloucester is in danger, too, as Suffolk and Beaufort and York have made plans to trap him.
Gloucester says she must be wrong, for he has done nothing wrong and cannot be punished for his good deeds. So long as he is loyal and without crime, he insists, he is above reproach. Even her scandal can't harm him. A herald enters to summon Gloucester to a parliament to be held at Bury St. Edmunds. Gloucester bids the Duchess farewell, so teary he can barely speak. The Duchess says her only joy now will come in death, and she is escorted to the Isle of Man by an attendant.
The struggle between Peter and Horner ends in Horner's death, despite Peter's inexperience at fighting and the inadequacy of their weapons, because Horner is drunk. The king then declares that Horner must have been the traitor, since he lost the fight--dubious justice to be sure. In fact, Peter made the whole thing up to bring punishment to his master, but the king's justice is unable to make a distinction between criminal and innocent men. Justice devolves into blood sport.
Gloucester listens as the Duchess tells him that all the other lords are out to get him. With a demonstration of his faith in truth and honor that reveals he belongs to an older, more virtuous time than the present, Gloucester insists that he cannot be brought down if he has not done anything wrong. In fact, he is incorrect. In another time, virtue might win over villainy. But in his present, politics will take precedence over justice, and scheming will win out over honorable behavior.