To please his wife, in a very vulgar way, Bannister organizes a picnic-party that requires the entire crew to march into a dangerous jungle along the Mexican coast filled with squawking parrots. According to Michael, as they take canoes through slithering snake and alligator-infested waters, "a lot of trouble and a great deal of money went into it, but it was no more a picnic than Bannister was a man." An important plot point is abruptly inserted into the picnic scene - Bannister tells Sidney Broome (Ted de Corsia), the yacht's steward, that he already is painfully aware that he will be the victim of a murder plot ("There's a plot against my life, correct? I'm gonna be murdered").

As the lavish preparations are made, Elsa calls Michael aside and anxiously tells him about Broome's character - he is really a private divorce detective hired by Bannister to tail and spy on her for evidence of unfaithfulness. If she would ever divorce her husband, she would be left with nothing:

Elsa: He isn't really a steward...He's a detective, Michael. My husband hires him to watch me. He wants to fix it so I'll never be able to divorce him...I haven't a cent, Michael. He wants to cut me off without a cent.
Michael: Does that matter so much, I shouldn't think it would?
Elsa: Oh, I told you, sweet, you don't know anything about the world.
Michael: Well lately, I've been rounding out my education.

That evening, torches lead a procession to the inlet where the picnic is to be held. Swinging in netted hammocks, Grisby (mixing "Grisby specials" from a tall cocktail shaker), Elsa, and Arthur drunkenly toss out verbal wisecracks, and bait each other about how Michael (who is considering quitting) serves as Elsa's "big strong bodyguard...with an Irish brogue." Bannister argues disagreeably with his partner about his degree of jealousy. Hateful of her own life, Elsa agonizes about being in their distasteful and destructive company, and agrees with Michael's oft-threatened sentiments about quitting:

Bannister: You know, you're a stupid fool, George.You ought to realize I don't mind it a bit if Michael's in love with my wife. He's young, she's young. He's strong, she's beautiful. (Elsa rises.) Sit down, darling, where's your sense of humor?
Elsa: I don't have to listen to you talk like that.
Bannister: Yes, you do, lover...Come to think of it, why doesn't Michael want to work for us?
Elsa: (sighing) Why should he? Why should anyone want to live around us?
Bannister: Where's his sense of adventure?

Under a full moon, Michael is summoned to join the trio to provide more fuel for their bickering, although Bannister condescendingly feels he isn't in their "social register." Recognizing how hateful they are becoming in their game-playing machinations to outwit and ruin each other, Michael makes a bitter comment about their methods of amusement. Bannister seizes the opportunity to speak about how he trapped Elsa into becoming his wife (probably through blackmailing her about her shady, miserable past in China, or enticing her with his money):

Michael: Is this what you folks do for amusement in the evenings, sit around toasting marshmallows and calling each other names? Sure, if you're so anxious for me to join the game, I'd be glad to. I can think of a few names I'd like to be calling you myself.
Bannister: Oh, but, Michael, that isn't fair. You're bound to lose the contest. We'll have to give you a handicap, Michael. You should know what George knows about me, for instance, if you really want to call me names. And Michael, if you think George's story is interesting, you ought to hear the one about how Elsa got to be my wife.
Elsa: Do you want me to tell him what you've got on me, Arthur?

In their cruel company, Michael is reminded of an experience he had while fishing off Brazil and likens them to a pack of blood-seeking 'sharks.' He recalls that the mad predators had a feeding frenzy upon themselves until none survived:

Do you know, once off the hump of Brazil, I saw the ocean so darkened with blood it was black, and the sun fadin' away over the lip of the sky. We put in at Fortaleza. A few of us had lines out for a bit of idle fishin'. It was me had the first strike. A shark it was, and then there was another, and another shark again, till all about the sea was made of sharks, and more sharks still, and the water tall. My shark had torn himself from the hook, and the scent, or maybe the stain it was, and him bleedin' his life away, drove the rest of 'em mad. Then the beasts took to eatin' each other; in their frenzy, they ate at themselves. You could feel the lust and murder like a wind stingin' your eyes. And you could smell the death reeking up out of the sea. I never saw anything worse until this little picnic tonight. And you know, there wasn't one of them sharks in the whole crazy pack that survived. I be leavin' now.

As Michael parts, Bannister throws out another insult toward Grisby: "That's the first time anyone ever thought enough of you to call you a shark. If you were a good lawyer, you'd be flattered."

When docked in the heat-soaked port of Acapulco, Grisby and Michael hike and pass peasants in an impoverished section of town before climbing to beautiful vistas above the harbor's beach, as Michael describes their exotic, but decadent locale filled with "hunger and guilt":

There's a fair face to the land, surely, but you can't hide the hunger and guilt. It's a bright, guilty world.

They pass a gigolo who tells his female tourist companion: "Darling, of course you pay me!" before arriving at the top of a parapet, filmed with high-angle overhead, dizzying views of the cliffs, rocks and void of water below them. In a bizarre and complex plan of murder and fraud that is about to unfold, the perspiring Grisby argues, convincingly (in his quirky, sing-song voice), that he wishes to disappear from the world and escape before Armageddon - a nuclear holocaust that will end the world:

"Think the world's coming to an end?... It's coming, you know. First, the big cities, then maybe even this! It's just got to come!"

[It is no coincidence that Grisby's fear of nuclear annihilation was also gripping the nation at the time of the film's making. His desire, later stated, to escape to "the smallest island in the South Seas" is paradoxical, given that US atomic bomb testing was being conducted in just such a remote location - the testing ground at Bikini Atoll. AND Rita Hayworth's screen persona as Gilda, another menacing screen siren, was already identified with the Bomb - her provocative image was painted on the casing of the first Pacific bomb dropped.]

O'Hara is asked by Grisby to accept his "straightforward business proposition" that pays $5,000:

Grisby: That's what I need you for, Michael. To see to it that I'm not around. How'd you like $5,000?...I'll fill in the details later...It's yours. All you have to do is kill somebody.
Michael (curiously): Who, Mr. Grisby? I'm particular who I murder...You know, I wouldn't like to kill just anybody. Is it someone I know?
Grisby: Oh, yeah, but you'll never guess...It's me...I want you to kill me!

Grisby departs with a glib and strange goodbye: "So long, fella!' as violins shriek loudly to end the scene.

The next night, after leaving dinner with her husband, Elsa (in a white dress) runs down a hillside in the dark to locate an uneasy Michael on a moonlit Acapulco street, where he tells her about Grisby's weird proposal of suicide and his fear of the world exploding. She admits to having thought of suicide for herself to end her own personal pain: ("I've looked at those pills [her husband's pain killers] so many times...and wondered if enough of them would kill my pain"), and asks Michael if he ever considered killing himself. She is already aware of Grisby's insane, suicidal impulses: "He's not sane, neither is Arthur."

Their conversation is interrupted by the forebidding appearance of Broome in the shadows. Spying on them, he threatens the couple's romantic intentions: "I'd hate to have to report you to the lady's husband." Michael angrily slugs him and knocks him down, and then pursues Elsa through impoverished streets when she flees in fear. When he catches up to her, he dances with her and promises to protectively care for her and provide a safe haven away from the evil of her surroundings. Teary-eyed, she contends that they are already in one of the world's "far places" and they still haven't escaped evil and suffering. Fatalistic about the world and already devoid of life to the core, she instructs her "foolish knight errant" to do what she has calculatedly done to survive: compromise, accept ("make terms") and "get along with" life's badness:

Michael: Sure, I'm gonna take you where there aren't any spies.
Elsa: Michael, where?
Michael: A long way off. Somewhere in the far places.
Elsa: Far places? We're in one of them now. Anyway, it doesn't work. I tried it. Everything's bad, Michael, everything. You can't escape it or fight it. You've got to get along with it. Deal with it, make terms. You're such a foolish knight errant, Michael. You're big and strong, but you just don't know how to take care of yourself. So how could you take care of me?

The scene changes as the cruise ends in the fall with the yacht's arrival in San Francisco, according to Michael's voice-over. He is a fish that has already been thoroughly "hooked" (literally swallowed and eaten alive) by Elsa's pleas for aid:

It was early October when we made San Francisco, and dropped anchor across the bay from the city in Sausalito. It had been a most interesting cruise, all very rich and rare and strange. But I had had no stomach for it. To begin with, living on a hook takes away your appetite. You have no taste for any pleasure at all but the one that's burnin' in you. But even without an appetite, I had heard it's quite amazing how much a fool like me can swallow.

He has convinced himself that Elsa has redemptive qualities - he can run off with her, save her from the sea of shark's blood, and take care of her (with the $5,000 bounty for killing Grisby). He tells her of his fantasy - his intentions of "running off with you to a desert island to eat berries and goat's milk." But she doubts his realistic ability to support her and declines his offer: "And I'd have to take in washing to support you." Believing otherwise, he asks: "Would you have to take in washing on five thousand dollars?" [She smiles, knowing that he has accepted, in his mind, Grisby's diabolical murder scheme.]

Over beers at the Sausalito waterfront bar, Grisby clarifies more of his absurd plan, stating that "the firm of Bannister and Grisby is insured against the death of either partner. That means if one of us dies, the other stands to get a lot of money." He also mentions that he is unhappily married, and wishes to leave the San Francisco firm permanently. Grisby hints, with a sublimated wish of his own, that the reward money will give O'Hara the opportunity to steal Elsa away from Bannister: "That ought to take a girl and sailor on quite a nice little trip." They make arrangements to meet later that evening (at Grisby's office) for Michael to sign some related papers ("a confession of murder"). Grisby gulps down a beer (in extreme close-up) as he toasts: "Here's to crime." Elsa's Chinese servant Li (Wong Chong), who is chauffeuring Bannister and his wife to the city, tells Michael before driving off, that Elsa will meet him in the city's aquarium at nine o'clock the next morning. As Bannister is driven away, he sticks his head out the window to presciently offer Michael his legal services: "If you ever need a good lawyer, Michael, let me know."

In Grisby's office, Michael listens to part of the typed, confessional statement he must sign, admitting that he killed Grisby on the evening of August 9th: "I shot and killed Mr. George Grisby, placing a dead corpse in the Sausalito bay..."

[Note: This part of the confessional should automatically have ruled out Michael's later guilt in court. The date is wrong (they docked in early October), plus later, Grisby's body wasn't discovered in Sausalito Bay, but outside his downtown law office.]

Grisby ironically rules out suicide: (he states that it's "against the law and we're not gonna break the law"), and instead wants Michael to help him fake his murder. As he counts out half the pay-off cash while listening to tropical music, Grisby describes how he will disappear:

This is going to be murder and it's going to be legal. I want to live, but I want to vanish. I want to go away and change my name and never be heard of again. But that costs money and it isn't as easy nowadays. If they're looking for you, they'll find you, unless they think you're dead. They'll find you even on the smallest island in the South Seas. That's where I'm gonna be, fella, on that smallest island...I want to live on that island in peace. That won't be possible unless the world is satisfied that I don't exist.

He then convinces gullible O'Hara, with double-talk and insane logic, that a murderer can't be convicted, in California, if there is no corpse to be found. He implies that his wily partner, Bannister, will cleverly exonerate O'Hara:

You know, the law's a funny thing, fella. The state of California will say I'm dead, officially dead, if somebody will say they murdered me. (He chuckles.) That's what I'm paying you for...You swear you killed me, but you can't be arrested. That's the law. Look it up for yourself. There's no such thing as homicide unless they find a corpse. It just isn't murder if they don't find a body. According to the law, I'm dead IF you say you murdered me. But you're not a murderer unless I'm dead. Silly, isn't it?

The next morning, Michael secretly meets Elsa in a San Francisco aquarium. The fascinating sequence is highlighted by their silhouettes back-lit in front of lurid, writhing, shadowy creatures of the deep (monstrous squids, octopuses with long tentacles, a turtle, giant goldfish, groper fish, moray eels, a barracuda, etc.) swimming in the fish tanks behind them. The pace quickens in their conversation as he tells her ("fair Rosalie") of his love and arrangement of rescue plans so that they'll be together. After having changed her mind, she begs, with words that come back to haunt her in the film's climax, for him to elope with her so she can escape from her predatory husband: "Tell me where we'll go, Michael. Will you carry me off with you into the sunrise?...Just take me there. Take me quick. Take me." Comically, a spinsterish schoolteacher and her young students on a field trip discover the lovers kissing.

After a passionate kiss, he admits his "foolish" decision to raise money by pretending to murder Grisby. She reads his pre-signed, fake confession with the description of the crime to be committed - in Sausalito:

I, Michael O'Hara, in order to live in peace with my God, do freely make the following confession...We arrived at the boat landing at approximately 10:20. Mr. Grisby said he heard a sound, something suspicious. He said he was frightened of a hold-up and asked me to get the gun out of the side pocket of the car just in case. I reached in and got the gun, but I had hardly taken hold of it when the gun went off by accident in my hand, and I saw that Mr. Grisby was all covered with blood. It took me a minute to realize that Mr. Grisby was dead, to realize that I, Michael O'Hara, had killed him.

Michael ties to further clarify the plot: "He isn't dead yet. Grisby's alive. He won't be murdered till tonight."

Confusing Michael even further, Elsa warns that her husband is undeniably behind Grisby's proposal. She speculates that her devious husband wrote the confession: "It's one of those famous Bannister tricks...There's more to it than that, Michael. I don't know what, but there's more. It's a trap of some kind...I'll swear my husband's behind this whole thing....Oh, Michael, why did you let yourself get dragged into it?" Michael admits that he was dragged into the 'murder' scheme because he's "a fool - a deliberate, intentional fool - and that's the worst kind." As the camera dramatically captures their giant, black profiles in front of the aquarium's tanks, Elsa confirms his appellation with her hushed and breathless voice, and assents to his participation in the crime plot. She passionately calls him her "beloved fool." Their kiss blots the screen black.

At the Bannisters' house in San Rafael on the night of the fabricated 'murder,' everything falls apart when Sidney Broome (the Bannisters' butler/detective) reveals that he knows what's up with Grisby. [The plot twist was that Grisby's plan is to kill Bannister and frame Michael, but his plan goes awry when Broome reveals his knowledge of the plan.] He attempts to blackmail Grisby and buy his silence:

"I wonder, am I the only one that's onto you and her?...Nobody else seems to guess you're sweet on her. That ought to be worth a little extra, but I'll throw it in for the same price...I can shut up, that's what I'm selling....I found out about a little plot of yours. You wouldn't want me to say nothing about you framing Michael. Frame him for a murder you're committing."

Broome insists on being paid immediately to keep quiet: "We'll settle our account right now." Broome is shot, point-blank, and mortally wounded by the inept Grisby. He returns the gun to Michael (to use for his own 'killing'), and tells Michael his alibi for the gunshots - he claims he was "just doing a little tar-get practice."

Grisby and Michael drive to the Sausalito dock (the scene of the planned 'murder') and on the way, rear-end the back of a truck at a stop sign. The pane of their car's windshield is smashed in two places from the impact, and Grisby is bleeding from cuts. He rationalizes that the concerned truck driver will make a "good witness" who saw them just before the 'murder.'

Meanwhile, Elsa who has heard the gunshot, finds Broome who has dragged himself into the kitchen of the house and is dying on the floor. Imperious above him, she listens impassionately as he tells her that he knows the plot against her husband:

There's gonna be a murder. Ain't gonna be no fake murder, not this time. Somebody's gonna be killed...Yeah, your husband. Maybe he's the one who's gonna be knocked off...Could be? You'd better get down to his office if you want to do anything about it.

Arriving in Sausalito outside the waterfront establishment, Grisby cheerfully smears the floor of the car and Michael's outer coat with his blood: "It's perfect. If you shot me, there would be blood, fella." They hear a piano playing in the background and see people celebrating in the dock's saloon as they orchestrate the 'murder.' As Grisby pulls away from the harbor in a speedboat, Michael takes multiple shots into the ground - and then the camera tracks after him as he approaches the crowd of patrons who have assembled on the outer deck after hearing the shots. The rotund bartender (Peter Cusanelli) queries him about his smoking gun:

Bartender: Hey, what are you doing with that gun?
Michael: I was just doin' a little tar-get practice.

Michael phones the Bannister house and hears the last dying words of Broome - also revealing to him Grisby's sinister scheme:

Get down to the office, Montgomery Street. You was framed. Grisby didn't want to disappear. He just wanted an alibi - and you're it. You're the fall guy. Grisby's gone down there to kill Bannister, now.

Michael hurriedly drives across the Golden Gate Bridge into the city, toward the San Francisco law office of Bannister - to prevent the lawyer's murder. His car is stopped by police who surround the law office - blood, a confession statement, and a fired gun are discovered on Michael's person. To his horror, Bannister is alive, but Grisby is wheeled by and laid out on a stretcher - dead. Subsequently, Michael is arrested - incriminated by the false confession that he had signed [it shouldn't have incriminated him], and framed on a fabricated murder charge of Bannister's business partner. Bannister also remarks to Elsa, who drives up, that Grisby was holding Michael's cap in his hand when he was found lying dead on the street: "Michael is going to need a good lawyer." Jealous husband Bannister acts as O'Hara's legal representative, defending him for both murders and reluctantly serving as Elsa's protector.

In voice-over, Michael admits that he was a "big boob" for getting mixed up in everything:

Well, it's my own fault, but that's how I got into it, big boob that I am. I began to ask myself if I wasn't out of my head entirely. The wrong man was arrested. The wrong man was shot. Grisby was dead and so was Broome. And what about Bannister? He was going to defend me in a trial for my life. And me, charged with a couple of murders I did not commit. Either me or the rest of the whole world is absolutely insane.