Yet another complication arises: Pedro, who is both a kinsman to Piraquo and Manuel and a servant to Duke Mendoza, knows a secret — the "court secret" of the title, which somehow involves Duke Mendoza and a mysterious treasure, and Carlo and Manuel too. The jealous Prince Antonio meanwhile provokes a duel with Manuel, which leads to Manuel's imprisonment. A meeting between Clara and Princess Maria shows them that they are rivals for Manuel's love; similarly Carlo and Manuel learn that they are rivals for Clara. Don Carlo gains Manuel's release and reconciles him with Prince Antonio; Manuel responds by releasing Clara from their marriage contract and letting her choose for herself — though Clara once again chooses Manuel. Carlo, stung by her rejection, challenges Manuel to a duel; Clara suspects, but Manuel pacifies her fears.