Act II begins in Hardcastle's house.
Hardcastle and several "awkward servants" enter, the former instructing them on how to appear sophisticated for the expected guests. One of the servants, Diggory, brags over his ability to hold his hands properly while serving, but Hardcastle stops him and chides him for talking too much. He also instructs them not to laugh at funny stories, since they are not officially part of the company. Diggory points out that one story of Hardcastle's – about "Ould Grouse in the gun-room" – is too funny to ignore, and Hardcastle, amused, allows they might laugh at that. As they exit, the servants continue to banter about where each should stand while serving.
Another servant enters, leading in Marlow and Hastings. The men admire how much the inn seems as though it might have once been a mansion, but complain that they will be expected to pay a higher rate because of its quality. While discussing inns, Hastings introduces Marlow's particular oddity of character: in front of modest, reputable women, he is "an idiot, such a trembler," while he is eloquent and lively around barmaids and common women. Marlow too laments the shortcoming, pointing out that the only modest woman he ever knew well was his mother. He tells Hastings he is overcome by the splendor of modest women, and because of his bumbling will likely never make it through the formal courtship process and thus might never marry. When Hastings asks how he intends to address Kate (whom he has been invited for the express purpose of courting), he says he will avoid looking her in the face and "bow low." Marlow then admits his purpose for the trip was not for himself, but to facilitate a meeting between his friend and the family of Constance, whom Hastings loves. Hastings assures Marlow he is not at all interested in Constance's inheritance and so needs no such meeting, but rather would be perfectly happy with the woman herself.
Hardcastle enters excitedly, asking for Marlow and offering them "hearty reception." Because of Tony's lie, they believe him to be the innkeeper. To himself, Marlow assumes aloud that the servants had given this man their first names (which he uses, perfectly acceptable for their host but impudent for a landlord). Marlow and Hastings converse with themselves about what clothes they ought to wear, which inspires Hastings to begin telling a story, which they ignore and interrupt, thinking it impudent in a landlord. Finally, Marlow cuts him off and asks for a glass of punch, which Hastings finds not only rude, but distinctly out of character from the modesty he had been led to expect.
He serves them a different sort of punch that what they requested, but they decide to humor him rather than confront him. They are amused by Hardcastle's loquaciousness and the way he speaks about politics as though he were a man of repute (which he of course is). They cut off another of his stories to ask for dinner, and when he tells them the cook is at work preparing it, they are shocked to hear they cannot choose their own meal at an inn. He attempts to impress them by revealing that the meal will include pig with prune sauce and other delicacies, but they rudely diminish the value of such a fine meal and demand "plain eating" like calf's tongue and brains. In essence, they want pub food. When he apologizes for lacking such food, they instruct him to bring what he has and decide to retire.
Despite their confusion over this seemingly pushy landlord, the men allow Hardcastle to accompany them to their rooms. However, Hastings stays behind, remarking to himself on the strangeness of the situation, and Constance enters to find him. They are happily reunited, and Constance quickly surmises the trick Tony played, and corrects the mistake for Hastings. Hastings insists Constance join him in eloping, but she believes her fortune will prove crucial in their lives, and begs time to try and persuade her aunt (Mrs. Hardcastle) to turn the jewelry over. Hastings suggests they not correct Marlow's false assumptions since Marlow's timidity would make him to leave quickly in embarrassment, and any plan for elopement would be negated. Obviously, Hastings's identity needs to stay secret.
They are still discussing the issue when Marlow re-enters, confused over why Hardcastle would want to dine with them. Hastings spins a new lie, telling Marlow that Constance and Kate Hardcastle are themselves staying at the inn that night. Marlow is terrified by the news, and begs that Hastings postpone his meeting until the next day, when he can meet her at the Hardcastle home (which, of course, he is in.) Constance will not hear of it, since Kate would see such a refusal to meet as insulting.
The argument is made moot when Kate enters, and is introduced to Marlow. He holds up decently at first, partially due to the encouragement of Hastings, and to Kate's questions about his worldliness, he says "I have lived, indeed, in the world…[but] I have been but an observer upon life, madam, while others were enjoying it."
Things take a turn into one of the play's funniest scenes once Hastings and Constance abruptly leave despite Marlow's pleas to the contrary. Marlow keeps his head down during the entire interview, and stammers pleasantries, while Kate controls the conversation, amusing herself with the man's timidity. She asks questions about his time with women, about light, "sentimental" conversations that mean nothing, and about hypocrisy, with his responses slowly devolving until she is forced to complete his sentences for him. All the while, she is confused because she expected a man of "impudence" but instead is faced with this timid fellow.
He finally finds a way to politely exit, and Kate, now alone, laughs to herself at his ridiculous shyness. She does, however, note both his "good sense" and good looks, and wonders whether she might be able to teach him a confidence to accentuate those qualities.
She exits, and then four others enter: Tony, Constance, Hastings, and Mrs. Hardcastle. Constance is attempting to talk to Tony, who assumes she is pursuing the marriage desired by Mrs. Hardcastle, and so ignores her. The focus shifts to the other two, where Mrs. Hardcastle enjoys talking of London with Hastings. She explains that, out in the country, the best she can do with London style is imitate it from magazines. She laments being saddled with an "antique" like Hardcastle, but is enlivened to hear that the fashion in London now sees the age of fifty as fashionable. She talks to Hastings of how much Constance loves Tony, and mistakes their bickering for flirtation. When Tony explicitly shows disdain for Constance, Mrs. Hardcastle attacks him, and they argue over whether he is ungrateful or whether she is a harpy for denying him his fortune.
Hastings asks the privilege to speak to Tony man-to-man, and so the ladies leave. Alone, Hastings strikes a deal: if Tony can help them to escape, Hastings will "take her off his hands." As an addendum to a deal he greatly endorses, Tony promises to try and help get her jewels so the lovers can have them.
Where Act I was primarily concerned with set-up, Act II is primarily concerned with establishing the contradictions and complications of the play's characters. On the surface, all of these people are comic types: Tony is the trickster, like Puck from A Midsummer Night's Dream; Marlow and Hastings are the romantic leads; Constance and Kate are the pure maidens to be won (typically not characters who create comedy); and the Hardcastles are the stodgy bastions of an old world who will work as antagonists to the young.
And yet part of Goldsmith's mastery is the way he expands these comic archetypes so as to suggest a broader worldview. It is in keeping with his professed goal of lampooning sentimental comedy in favor of laughing comedy that he exhibits foolishness in even the most outwardly heroic characters, and heroism in the “lower” characters.
First, consider the heroes, Hastings and, more so, Marlow. While they would be seen as virtuous young men to their audience – especially because of their aristocratic standing and signs of good breeding – we see right away that they are capable of extreme “lowness” and even of meanness. The most explicit example is Marlow's love of common women. Something that would be considered a vice in moral comedy is here matched in Marlow by a sincere desire to be close to a “modest” woman. Goldsmith accomplishes with this contradiction not only a situation rife with comedy derived from dramatic irony, but also creates a fuller human being. Likewise, both men, when operating under the fallacious assumption that Hardcastle's home is an inn, are quite dismissive of and cruel to Hardcastle. Here, Goldsmith employs a subversion of expectation to suggest the cruelty that can be engendered by strict class-ist attitudes, which of course would be an implicit charge against much of his theatre audience. The men assume that Hardcastle cannot be a gentleman because such behaviors must be learned; the irony is that Hardcastle is a gentleman, and has learned as much, but the men are so blinded by their own perspective that they can't see past their assumptions.
Meanwhile, the women are far more interesting than one might expect. Constance is perhaps a bit bland, but that fits within the confines of her sub-plot, which veers the closest to a traditional sentimental storyline. What does make Constance different from most romantic, sentimental heroines is her pragmatic realization that money matters quite a lot. Where Hastings's assertion that he needs only the woman, not the money, is a trope of romantic comedy, Constance will have none of it. Goldsmith creates a woman to remind us that such a philosophy is grand and wonderful for rich men, but only window dressing to people in less privileged conditions. Constance loves Hastings as much as he does her, but she also knows they need cash.
Kate, on the other hand, falls into a literary tradition of strong heroines, a tradition much loved by Shakespeare. Her contradiction is exemplified by the way she dresses plainly for her father and well for her friends, the way she can straddle the line between town and country, sophistication and simplicity. This ability suits her well in confronting Marlow. Not only is she able to see past the stammering caused by his ridiculous expectation of manners, but she is also able to laugh at herself and her situation. She deserves the happiness she will find, because she has the strength to identify it and go after it.
Mrs. Hardcastle is perhaps the character who least transcends her type. She is very much a stock character, the older woman overly concerned with her appearance, vain to the point of cruelty at times. However, her husband is as interesting as his daughter. While he is certainly stodgy, we see here an affability and desire to understand the situation. Where a hot-tempered man might throw the young men out immediately due to their rudeness (especially considering how he complained over new fashions in Act I), we see in this act a patience and desire to understand the situation.
The love of appearance over substance is very much apparent as a theme in this act, and will continue to be so throughout the play. It is manifest in many small symbols, like the way Marlow and Hastings decide how to dress in order to best present themselves, or the way Mrs. Hardcastle seeks comfort over her age, hoping it will not make her unfashionable. And yet the truth is that the “high” appearance of things is not the truth, but merely a guise behind which lies the baser nature of humans. Marlow and Hastings would gladly accept the rich-man food if they had not been tricked by Tony. However, because they believe the house an inn, they reveal their true nature – they love bar food! It is similar to Marlow's true love of “lower,” livelier woman, while he simultaneously attacks himself for an inability to love a woman of acceptable rank. Goldsmith's desire not to praise virtue but to lambaste folly is very much on display.
Much of this thematic content is apparent in the act's signature scene, the meeting of Kate and Marlow. Many things are happening here. Firstly, it is a wonderful parody of sentimental dialogue. One would expect the two lovers in a sentimental comedy (again, think of today’s romantic comedies) to express acceptable philosophies about life to one another, but here, Marlow is entirely unable to say anything, and it is the woman who has to put those words in his mouth. It is as though she is leading him into the sentimental conversation expected of them, while all the while she enjoys the situation.
However, the substance of the conversation does touch on the play's theme: the importance of living, rather than observing life. Ironically, Marlow believes he has only engaged in the latter, because he lacks adeptness at speaking with modest women. Kate, on the other hand, believes that Marlow's lively nature (which she has not seen yet) is the way to actually experience life. He has been blinded by aristocratic expectation to look down on his own pursuits, while right in front of his face is an aristocratic woman who would value such in him if he had the courage to reveal it. The dichotomy between city life (with its manners and excitement) and country life (with its simplicity) continues to trace through the play, with Kate standing as the one who can relate to both.
The Freudian content of the play is expanded in this act to include not only Tony and Mrs. Hardcastle, but implicitly Marlow and his own unseen mother. He confesses to Hastings that he has only ever known well one "modest woman:" his mother. The implication might well be that Tony has been ruined by an Oedipal complex wherein “modest women” intimidate him as pale imitations of an overbearing mother. Certainly, we see a similar situation (with opposite results) in Tony's animosity against Mrs. Hardcastle. She smothers him to constant anger, and yet he is utterly dependent upon her. Again, these currents in the play are certainly unconscious if they are there at all, but it's an interesting way to understand the dynamics.
Lastly, a word needs be said about the comedy in the act. Much of it comes from “low” humor, like the servants at the top, who are wonderfully idiotic and have ridiculous bickering. Yet the best humor here is again dependent on dramatic irony, as the web of confusion allow us to laugh at people who are revealing their true nature around others who they would never grant such privilege under more forthcoming circumstances.