Willie and Sam practice for the dance competition and Hally comes home and encourages them. He's in a pretty good mood until he gets a phone call from his mom saying that she's going to bring his alcoholic, disabled father home from a stint in the hospital. From then on, Hally gets more and more cynical and irritable. This sets things up and tells us what Hally's mission is: to keep his dad away from the house.
From the phone call on, Hally's in an awful mood. He starts taking out his anger on Sam, who used to be his friend. He makes him call him Master Harold, tells racist jokes, and even spits on Sam's face. Hally takes all his rage about his horrible family situation and directs it at Sam, who he knows won't retaliate. Sam relates a painful event from Hally's childhood to show him he understands his grief about his father.
Hally leaves and Sam and Willie are left to clean up. They play a last song and dance. From the spit to the last dance, act three wraps up the loose ends. Hally and Sam's relationship is broken. They might reconcile, but things might never be the same. Sam and Willie are left to clean up after Hally leaves.