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Act I opens at Windsor Castle where King Richard listens to the allegations of his cousin, Henry Bolingbroke (the Duke of Lancaster), who accuses Thomas Mowbray, Duke of Norfolk, of misappropriating royal funds and of masterminding the recent death of the Duke of Gloucester. Richard tries to effect a reconciliation between them, but to no avail. Richard has no other option left but to order that a trial by combat be held at Coventry to settle the dispute. Just before the combat begins, Richard decides to banish both the opponents: Mowbray for life and Bolingbroke for ten years, which is then reduced to six years. Richard notices the show of popular affection for Bolingbroke as he goes into exile. Richard himself makes plans to leave for Ireland where a rebellion has broken out. Before he leaves, he is summoned to the bedside of the dying John of Gaunt, Bolingbroke's father.
In Act II, John of Gaunt anxiously awaits Richard's arrival. He is hopeful that the young king will listen to the advice of a dying man. When Richard arrives, Gaunt cautions him against the flatterers who surround him and berates him for his irresponsibility in administering the royal funds. Richard's sole reaction is to dismiss his uncle as a mad "lean-witted fool." As soon as Gaunt dies, Richard confiscates his property and wealth, against the protests of the Duke of York, who reminds him of Bolingbroke's rights. Angered by Richard's outrageous behavior, Henry Percy, Duke of Northumberland, reviews the king's actions with Lord Ross and Lord Willoughby, who reveals that the banished Bolingbroke has already set sail for England with an army of three thousand men.
In the meantime, Sir John Bushy attempts to comfort Queen Isabel, who is grieving over her husband Richard's departure for Ireland. Sir Henry Green bursts in with the news that Bolingbroke has landed and that he has won the allegiance of such powerful men as Northumberland and his son Harry. In Gloucestershire, Bolingbroke explains to York, who is acting as the regent in Richard's absence, that he has violated his sentence of banishment only to claim his inheritance as Duke of Lancaster.