Cecil helps Blake with his money problems. Jeff and Fallon get married. Blake's driver, Michael Culhane, who's been sleeping with Fallon, is a bit jealous, because she won't take him anymore. Blake hires him to do undercover work for Denver-Carrington, and he starts flirting with Cecil's secretary. Blake warns him about being unloyal. Steven gets a visit from his gay friend, Ted Dinard, from New York.

Walter takes Steven to a bordello to try to ""straighten him out"". Something goes wrong at Matthew and Walter's rig, Steven is blamed for sabotaging, and though he's innocent, he looses his job. Blake's plan now is to take Walter and Matthew's rig when they're in trouble. Krystle doesn't like Blake's methods in his work. She pawns an emerald necklace and loans Matthew the money to help him. She makes a false copy so Blake won't understand it's gone. In the end, Matthew and Krystle kiss, but Krystle breaks it off and leaves.

Blake apologizes to Krystle about his behavior, and she forgives him. Michael has found out about Krystle's pawning and tells it to Fallon. Matthew and Walter finally strike oil. Claudia goes out with a guy she meets and almost has an affair with him. She manages to pull out, but later she has an affair with Steven. Lindsay starts finding out about it.

Claudia keeps accusing Krystle about her relationship with Matthew during his marriage. Steven is on his way home from Hollywood when he picks up a guy who wants a ride to Denver. When they get there, the guy tries to blackmail Steven. Steven beats him up, and is arrested for assault. Cecil has chest pains and seems to be getting heart problems. Blake accuses Alexis of shooting at Krystle's horse and threatens her.

Blake tries to be friends with Adam, but Adam is rejecting. Alexis tells Mark that he's still married to Krystle. Mark seeks to get a job as a tennis pro at Fallon's hotel. Fallon is attracted to him, but she takes distance from him when she finds out he's Krystle's ex-husband. Jeff quits his job at ColbyCo and starts working for Alexis, and Adam does not like it. Joseph wants to quit his job at the mansion and go to his daughter, Kirby Alicia Aynders, in France, but Blake talks him into staying.

Jeff starts being dizzy and affected by the painting in his office. Joseph tells Kirby to stay away from Jeff. Krystle goes to Acapulco to find out what really happened when they had they so-called divorce. Blake comes after her to be with her and support her. They finish the case, the divorce will be legal, and Blake and Krystle's marriage will be valid. The oil rig Steven works on explodes.

Alexis, concerned the doctors will learn the truth behind Jeff's illness, orders his office to be remodeled and the lethal paint compound removed. Mark and Fallon make love in Haiti; Blake learns Alexis is planning to orchestrate a Denver-Carrington/Colbyco merger to control both companies. Dr. Edwards, a physician who cared for Adam in his younger days, arrives in Denver to see his former patient, a one-time drug user. In the Singapore hospital, Steven's bandages are removed and he is handed a mirror. Blake is stunned to learn the hospital has found poison in Jeff's bloodstream.

Upon hearing that Kirby has married Jeff, Joseph tells his daughter she has ruined her life. Blake suggests to Alexis they call a truce to their battle over Steven; Alexis offers Steven a share in Colbyco. Adam informs Fallon he doesn't consider Steven emotionally capable of handling the family business. After discussing the possibility of a reconciliation with Sammy Jo, Steven returns from New York alone. Blake disapproves of his son's plans to move out of the mansion with little Danny, but Krystle insists he let him go to prevent further alienation.

Blake confronts Alexis with evidence of fraudulent figures involved in the recent merger; Alexis learns Blake's lucrative oil extraction process does not extend to Colbyco. Newlyweds Jeff and Kirby have their first fight; Steven visits Claudia at the High Meadow Sanitarium. Alexis offers Mark money to leave Fallon; he refuses. Later. Fallon finds her mother in Mark's bed, undressed. Krystle arranges a dinner to improve relations between Steven and Blake; Alexis interferes and sees that Steven is out of town, unable to attend. Blake insists his absence is due to hostility and Krystle, incensed at her husband's insensitivity, storms off.

Following through on the plan to retain custody of Danny, Steven and Claudia fly to Reno and are married. When the judge receives the assurance they will jointly rear the child, the suit is dismissed. Attempting to win Krystle back, Blake offers her a public relations job at Denver-Carrington. Adam asks Alexis to sign three routine documents, but the second and third pages are positioned so only the signature line is exposed. When alone, Adam crumples the first page and carefully places the other two in his pocket. Fallon and Jeff investigate the poisoning incident in Montana. They are stunned to learn the name of the prosecuting attorney was Michael Torrance--the name Adam used before arriving in Denver.

Kirby proposes that she and Jeff divorce. Adam tells her he wants to be a father to their child. Dex and Alexis make love. Jeff is jealous to see Fallon with Peter DeVilbis. Peter's champion racehorse, Allegre, is up for sale, and Blake decides to buy the mare. At the Carousel Ball, the high point of Denver's social season, Blake and Krystle announce their intentions to remarry. Steven warmly wishes his father the best. Blake is touched by the gesture and welcomes his son back into the family.

With the family at the hospital waiting for Fallon to regain consciousness, Blake races to the airport to intercept Peter. Passing through security, DeYilbis sets off an alarm and the guards find a cache of drugs in his briefcase. Blake blocks his escape, and Peter is taken to jail. Blake is offered an important political post. McYane informs Alexis of the appointment. He is sure she will try to topple him and wants to be there when she does to blackmail her. Kirby accepts Adam's marriage proposal. Fallon regains consciousness and finds she is paralyzed.