The carver spent a sleepless night infatuated with the damsel in men's clothing. The majordomo wrote to the duchess and duke about how amazed he was at Sancho's shrewdness. Sancho awoke to a less than filling breakfast ordered by the physician, who told him that it would strengthen his wits.
Sancho begins to curse his government and those who bestowed it upon him. However, he once again allowed people to come before him to pose questions or to judge their cases.
A man comes up and tells Sancho that a great river goes through a district. There is a tribunal that has decreed that anyone crossing the bridge will be questioned as to why they have come. If they tell the truth, they will be allowed to continue. If they are false in their accounts, they will be hanged. A man came saying that he is to be hung on the gallows. The judges are confused about what to do. If they don't hang him, he has sworn falsely and deserves to be hung. On the other hand, if he is telling the truth--he should be set free.
Sancho tells the man to let the man pass freely, for it is better to do no harm when it hasn't been earned.
Sancho goes to dine and has a letter from Don Quixote read to him. Don Quixote praises him for his good work. He was expecting to hear that Sancho blundered, but the report said otherwise. He continues to offer more advice. He tells Sancho to be certain to show his gratitude to those who gave him the island. He tells him that the duchess has sent a gift to Teresa. Don Quixote is concerned he has fallen out of favor with the duke and duchess over the matter with the duenna, but he doesn't care--for he was doing his duty.
Sancho writes back that the business is harder than he expected, and he is dying from hunger. The duke has warned him of assassins, but he is certain the physician will kill him before they get the chance. His ideas of being a governor don't match the reality. He talks about the incident with the girl in men's clothing. The carver and he are going to the father, the carver to ask for the girl's hand, and Sancho to ask for the boy to marry his daughter.
Sancho tells Don Quixote to follow his own advice and show gratitude towards the duke and duchess, for he can only harm Sancho by failing to do so. He asks Quixote to keep him posted about Teresa and his children.
Those who are in on the joke plan on how to overthrow him. Meanwhile, Sancho passes several laws. He allows anyone to import wine from anywhere they please, providing they are honest about where they get it. They are not to dilute or change the brand name. He reduced the price of shoes. He placed a fix rate on servants' wages. He imposed penalties on those who sang lewd songs. Many of these laws were considered good that they remained in effect after he left office.