Daniel and Mr. Vandernoodt go out for a walk and a cigar. Mr. V. and Daniel establish pretty quickly that neither of them is a fan of Grandcourt's.
They wonder about why Grandcourt married Gwendolen.
Then Mr. Vandernoodt talks about how Grandcourt is keeping up a home at Gadsmere. (To recap: that's where Lydia Glasher and the kids live.) Daniel starts to feel really curious, but he doesn't even need to ask. Mr. Vandernoodt is feeling gossipy and tells him all about Lydia and the kids.
Daniel is totally disgusted with Grandcourt and asks if Gwendolen knows anything. He feels really curious, but he's also glad when Mr. Vandernoodt doesn't have any more gossip to share.
Daniel guesses, based on his earlier conversations with Gwendolen, that she knows that she's done something wrong. He judges her but also pities her.
Daniel goes over to where all the ladies are hanging out and starts talking up Mirah's talents, just in case there's anyone listening who needs singing lessons or knows someone who does. Some ladies, like Lady Pentreath and Juliet Fenn, could use some convincing. Lady Mallinger does her best to help Daniel make his case. Gwendolen pouts.
Gwendolen goes to the piano and hopes that Daniel will join her.
Gwendolen tells Daniel that she wants lessons from Mirah. She asks him if he thinks Mirah's perfect. Daniel figures this is a totally appropriate time to tell Gwendolen that Mirah almost killed herself.
Gwendolen is like, "Oh, what stopped her?" and then says that people like Mirah shouldn't be pitied. She talks about Mirah like Mirah's perfect and blameless, and she guesses that Daniel is into that sort of thing. Gwendolen figures that he could never love a guilty, "wretched" woman like her.
The next day is New Year's Eve. There is going to be a big dance.
When Gwendolen gets dressed, she thinks about the time she spent in Leubronn and really wants to put on her turquoise necklace. She doesn't want Grandcourt to get mad about it, though, so she wears it like a bracelet instead of as a necklace.
Lady Pentreath dances with Daniel. Later on, Grandcourt stands next to Gwendolen, but they don't speak to one another. Daniel comes up to ask her to dance. She says that she's not going to dance any more that night, but she asks him to bring her some water.
When she drinks the water, Daniel notices the turquoise necklace on her wrist. Grandcourt notices him noticing it. He tells Gwendolen that it's ugly. She's like, "Oh, I like to wear it because I lost it one time and someone found it for me."
Daniel tells them that the moon looks nice tonight. Gwendolen says she wants to go look at it. Grandcourt tells her to go with Daniel.
They go for a walk. Gwendolen asks Daniel what he would have thought of her if she had gambled again and lost the necklace again.
Gwendolen says that she knows he disapproved of her gambling because she made a gain on other people's losses, but that she's done that it an even more serious way.
Gwendolen asks Daniel how she can make up for the terrible thing she's done (for our reference, marrying Grandcourt, though she never actually says this explicitly).
He tells her to look out for other people besides herself. He takes her back inside and hands her off to Grandcourt.
Grandcourt calls her out on wearing the necklace on her wrist – he figures there is some "secret understanding" between the two of them. He tells her that she's making a fool of herself and tells her to behave herself.
On their last day, Gwendolen catches up with Daniel again and asks his advice on what he would do if he were in her shoes. He tells her to keep trying to be good.
This goes on for a while. Then Gwendolen says she will be better off for having known him.
They go their separate ways. Then Sir Hugo comes by and tells Daniel that he hopes he's not "playing with fire" (36.165).