Rumor addresses the audience, claiming to have spread its namesake which tells the success of Hotspur and Douglas at the expense of King Henry IV and his son Henry Monmouth. Rumor boasts that his mischief has caused a messenger to be dispatched to Hotspur’s father Northumberland who is old and sick and who will be told a lie.
Lord Bardolph arrives at Northumberland’s residence to deliver good news: Northumberland’s son Hotspur has all but slain King Henry IV, Douglas has subdued the king’s notable nobles, and the king’s son’s right hand man is in Hotspur’s custody. Lord Bardolph admits, however, that his news is hearsay. By and by, Northumberland’s servant Travers arrives with news to the contrary. But Travers’ is hearsay too, compelling Lord Bardolph to swear on his honor that if his words prove false he would readily give up the whole of his wealth. Eventually, Northumberland’s servant Morton, who has witnessed the events at Shrewsbury with his own eyes, arrives to reveal the truth which corroborates Travers’ claim that Northumberland’s son Hotspur is dead. Morton explains that Hotspur’s death at the hands of Henry Monmouth dispirited the rebel faction to the extent Hotspur’s best men lost their stomachs to fight and were subsequently taken captive while retreating. The king has triumphed. Subsequently, Northumberland defies his enfeeblement: He casts aside his crutch and headpiece and vows to die while assuming the role his son had taken on to his--Northumberland's-- disapproval. Alarmed, Morton and Lord Bardolph assure Northumberland that their rebellion isn’t yet a lost cause, that they have an ally in Archbishop of York who will rally many more to their cause.
Falstaff discusses the state of his affairs, which isn’t all that good credit wise, with his page when he is sought after by the Lord Chief Justice. Worried that he is in some sort of trouble, Falstaff tries to avoid the meeting altogether, but only manages to have it delayed. Anon, notwithstanding Falstaff’s blandishments which are meant to well dispose the man who will possibly make Falstaff pay for one crime or another, the Lord Chief Justice identifies Falstaff as a thief for which he could be brought to a reckoning. On account of Falstaff’s services in Shrewsbury, however, services which presumably do Falstaff credit (they do not actually), the Lord Chief Justice informs Falstaff that he might look the other way with regard the episode in Gad’s Hill. He avows not to look the other way, however, if Falstaff continues to hobnob with Prince Harry. Indeed, the Lord Chief Justice warns Falstaff, that the injunction to cease associating with Prince Harry comes directly from the king himself. With that, bidding Falstaff well who is to fight side by side Lord John of Lancaster against the rebels Archbishop of York and the Earl of Northumberland, the Lord Chief of Justice departs. Having dodged one bullet, Falstaff dwells again on his failing finances and resolves to fix his money problem by cheating and getting his share of the state’s public funds that are earmarked for honorable war veterans.
The rebels discuss their prospects of success should they proceed to oppose the king’s forces with their present numbers, which has yet been reinforced with Northumberland’s men. Lord Bardolph counsels prudence and argues that they should only engage the king’s forces when they are certain that their numbers will give them the advantage and not be as rash and foolish as Hotspur who had rushed in with inferior forces. Hastings argues, however, that Hotspur had cause, and moreover that their forces as they’re presently constituted will be a match equal to the king’s as the king must deal with the French and Glendower’s Welsh, in addition to the rebel forces. Upon that, rebuking the commoners whose fickleness was the cause fo Bolingbroke’s (King Henry IV’s) ascension to the throne, the Archbishop of York determines that the best course of action is to oppose the kings’ forces now with or without Northumberland’s reinforcements.