Lady Isabella (Elizabeth Hurley), the wife of Sir Augustus Farthingdale, the English military envoy to Portugal, is taken captive.
When Sharpe returns to camp, Wellington, the British commander, decides that drastic action is required to discourage desertion before it can infect his army.
Sharpe sneaks into the village with Sergeant Harper and his "chosen men" on Christmas Eve, when the enemy is drunk and distracted, and frees the captives.
While they wait for Captain William Frederickson to bring up his company, it is revealed that Lady Isabella had been a prostitute and Sharpe's lover.
When Farthingdale tries to negotiate, Sharpe stops him by threatening to reveal Isabella's past to the Lisbon court.
The French attack, outnumbering the British 10 to 1, but fall into Sharpe's trap and are repulsed with rocket artillery.