Ralph and Arthur return to Gride’s house. Peg doesn’t answer the bell. The neighbors find this amusing—suggesting she has been murdered or has died from something she ate. Ralph and Arthur are forced to break in.
Ralph burns the bond, since it is no longer of use to him. Arthur Gride cries that Peg has robbed him. She has taken his box of important documents. Though she can’t read, she’ll get someone to read it for her and tell her what to do with them. Ralph wants to call the police, but Arthur doesn’t want to. The papers can be used against him and send him to prison.
Ralph leaves Gride. He returns to his office to find out an investment of his has failed. He believes someone in particular is responsible, and he plans to revenge himself.
Ralph sends Newman to post a letter ordering Squeers to come. Squeers comes shortly, claiming a rash is plaguing his students—but they are well otherwise.
Ralph orders Noggs to take his lunch break. He escorts him out and locks the door to prevent him from spying upon them. Ralph explains to Squeers he is suspicious of Noggs. He’ll eventually bring about Noggs' ruin, but until then he is keeping him ignorant of his business.
Squeers is worried about the risk of their scheme. Ralph points out the only one who is lying is Mr. Snawley, who is claiming that Smike is his son. Squeers is only swearing to cricumstances of how Smike arrived at his school—all which are true.
Ralph tells Squeers about Nicholas’ latest offense. He has carried off a bride who is entitled to some property she is currently ignorant of. Any man who marries her—which Nicholas intends to do—will become wealthy. This was one of the deeds that Peg had stolen. Ralph wants the deed recovered so he can burn it, since no one can profit now save the girl and her husband. That is why he has called for Squeers.
Squeers is reluctant to get involved with a theft. Ralph tells him that Peg is ignorant, and she had done this robbery on impulse. It won’t be difficult for Squeers to get into her confidence and play upon her fears. Ralph offers him a hundred pounds. Plus it will be perfect revenge on Nicholas, who will marry a poor woman when he expects to marry an heiress.
Ralph will track down Silderskew. He orders Squeers not to visit him until Ralph calls for him.