Proteus alerts the Duke of Valentine's plan to elope with Silvia. Proteus explains that were it not his "duty" to notify the Duke of this development, he would not betray his friend in such a manner. Proteus is, of course, lying, as his true motivation is his desire for Silvia. The Duke admits that he has known for some while that Valentine has been visiting his daughter's room by means of a ladder, but that he did not want to challenge Valentine and appear ungentlemanly. Proteus begs the Duke to foil Valentine's plot without identifying Proteus as his source.
Valentine rushes through the courtyard, past the Duke, who asks him to stop a while and chat. Valentine is perturbed by this request, but nonetheless stays patiently. The Duke confesses to Valentine that he is frustrated with Silvia for ignoring his wish that she marry Thurio. The widower Duke makes up a story, telling Valentine that he is searching for a new wife to replace the love he once felt for his disobedient daughter. The Duke plans to "turn [Silvia] out to who will take her in./Then let her beauty be her wedding dower,/For me and my possessions she esteems not" (III.i.77-79). The Duke asks Valentine for his advice on how to woo a coy lady from Milan. Valentine embarks on a love lesson befitting of his name. He explains that all women love jewels and that when a woman frowns upon a suitor, it is not out of hatred but out of a desire to make him love her even more. Valentine advises the Duke to visit his ladylove by night, using a "ladder made of cords" to enter her locked chamber. At the Duke's request, Valentine promises to procure such a ladder.
Valentine begins to lose patience as the Duke pesters him with more questions. He asks Valentine how he should convey the ladder to the scene. Exasperated, Valentine says that the Duke could hide it under any cloak. The Duke insists on trying on Valentine's cloak, claiming that he needs to get used to wearing one. While trying on Valentine's cloak, the Duke discovers a letter in the pocket that outlines Valentine's plans to escape with Silvia. The enraged Duke banishes Valentine from his court, leaving Valentine distraught. Proteus comforts Valentine with an exaggerated description of Silvia's mourning and kindly accompanies him out of the Duke's palace.
Launce tells the audience that his master Proteus is a knave. Launce then announces that he himself is in love, though no one knows about it, and shows a letter to Speed listing his beloved's characteristics: she can fetch, carry, milk, sew, brew good ale, knit, wash and scour. She is not without her detriments: she is toothless, and overly fond of liquor, and has illegitimate children and "... more hair than wit, and more faults than/hairs, and more wealth than faults" (III.i.339-340).
The Duke asks Proteus to convince Silvia to fall in love with Thurio. Proteus feigns unwillingness to slander Valentine, but the Duke tells him that since nothing Proteus can say will help Valentine, no words can hurt him either. Proteus asks, "But say this [slandering] weed her love from Valentine,/It follows not that she will love Sir Thurio," hatching his plot to divert Silvia's affections directly to himself (III.ii.49-50). Proteus advises Thurio to gather musicians to sing a sonnet under Silvia's balcony that evening.
The juxtaposition of the respective love pursuits of Proteus and Launce contrasts Proteus' passionate rashness and Launce's methodical practicality. Proteus' pursuit of Silvia is marked by disingenuousness: he claims to act out of a sense of duty, though in reality is motivated solely by his sexual appetite. He not only betrays both Valentine and Julia, but also presents a false front of honor to the Duke. Launce, on the other hand, is straightforward about his reasons for loving his milkmaid: his milkmaid has valuable workwoman's skills and a large dowry. He verbally expresses the same motivations for falling in love that drive the forging of marriages among the upper classes.
In addition to offering economic security, money is inextricably linked to status. The Duke desires Silvia to marry the unappealing Thurio because he is fantastically wealthy. This fact situates Thurio at the top of the financial, and thus social, hierarchy, and suggests that, though he owns a title, the Duke may be less wealthy than Thurio. In his conversation with Valentine, the Duke threatens to disown Silvia and not give her a dowry. The Duke's threat implies that Valentine could not marry without a substantial dowry because he is less wealthy than the Duke and a lesser noble. Additionally, the Duke's bargain with Proteus smacks of a financial transaction; for the goods of Proteus' gossip, the Duke adopts him into his inner circle of trusted advisors. The Duke and Proteus become hierarchically aligned because of their ability to interact, or transact, on an equal plane.
Although the Duke is hardly as detestable as Proteus, he aligns himself with Proteus' single-minded morality. Just as Proteus believes that one value, love, must necessarily cancel out the other, friendship, so too does the Duke view matters as black-and-white: "Where your good word cannot advantage him/Your slander never can endamage him./Therefore the office is indifferent" (III.ii.42-44). It is this straightforward approach to life that allows both Proteus and the Duke to establish a clear hierarchy of values for themselves, which, in turn, allows such things as friendship and respect to be cast aside with ease.