Mr. Squeers is too drunk to notice how upset his daughter is the night of the tea party. She kept one of the boys up so this child would encounter her father first and bear the results of his anger. Having vented on the victim, he goes to bed.
The hungry servant Phoebe is attending to Miss Squeers’ nightly beautifying regime. Seeing how the usual flattery is not working, she starts putting down Miss Price—aware of what had happened at the tea party. Miss Squeers claims that Tilda consorts with coarse people who no doubt influence her behavior. Phoebe states it is a pity that Tilda doesn’t model herself after her superiors—like her friend Fanny. Miss Squeers admonishes Phoebe for her unkind words, though she agrees with what is said.
Phoebe tells her that Mr. Browdie thinks his wife is coarse too, and he would rather have Miss Squeers. Fanny laments on how irresistible she is and is the cause of married men being led astray from their intendeds. Phoebe says they can’t help themselves.
Fanny says that though Tilda is flawed, she wishes her well. She will let Tilda keep Mr. Browdie, for it is better that she is married. Deep down, Miss Squeers knows that her servant is lying. However, it allows her to vent her feelings.
This enables her to make up with Tilda the next day. Miss Price tells Fanny that she and John are going to be married in three weeks. Miss Squeers is overjoyed, particularly as it means Matilda isn’t planning on stealing Nicholas from her. She tells her friend that she hates Nicholas for casting her away. She wishes she and everyone else was dead.
The two start quarreling again over Nicholas. Tilda says she can’t help it if men find her attractive. However, the girls reconcile yet again—as they often do when they fight. They discuss Miss Price’s future wardrobe.
Nicholas is out walking when Fanny is escorting her friend home. Fanny pretends to feel faint. Nicholas gives a greeting but walks by. Matilda calls him back to help support Fanny. He apologizes for being the cause of their discord the other day. He then asks if Fanny thinks he is in love with her. Miss Price confirms this. He says that this is preposterous. He has just met Fanny. Even if he had known her a long time, he would not fall for her. He doesn’t want to hurt her feelings, but it is better for her to know the truth. Besides, he looks forward to the day he can leave her father’s establishment, and he will not go away with good memories. He bows and leaves.
Miss Squeers is furious. She has been rejected by a lowly teacher’s assistant, and in front of her best friend who is about to be married. She hates Nicholas for humiliating her, and she plans to revenge herself.
She tells Tilda that Nicholas has too unstable of a temperament, and she plans to give him up. It had never occurred to Fanny Squeers that Nicholas would reject her. She considers herself beautiful. Her father is Nicholas’ master, and her family has money. She could make Nicholas’ situation very agreeable as his friend. She can also make it difficult, which she does. She complains to her mother, who already hates Nicholas.
Smike has followed Nicholas around since the man had shown him some kindness. This being noticed, he is treated even worse than usual. He is being beaten constantly.
Smike has difficulty learning what the younger students already have mastered. He is scorned even by the other boys. However, he wants to please Nicholas, so he tries.
Nicholas tells Smike he plans to leave. Even the world cannot be as cruel as this place of Squeers’. He promises Smike he will help him.