Curly starts talking with Aunt Eller, as he's looking around Laurie, a girl he seems to "have his eye on". He secretly has a plan to take her with him to the box social. She comes out singing "What a Beautiful Morning", but doesn't seem to take to Curly very much, as he's "smart-alecky" and not serious. He then starts up a little yarn about a wagon (a surrey) that he hired to take someone to the box social. That's where the next song comes in ("Surrey with the fringe on top"). Laurie seems to be taken with the story and wants to go, but as you could expect from Curly, he has made up the whole thing. That makes her mad at him again and she shuts herself inside her house. Curly plans to take Aunt Eller on his surrey and he runs off for a bit.
Another plot going on at the same time starts just when Will Parker comes back from a steer-roping contest in Kansas City. He has had his eye on Ado Annie, the daughter of a farmer, for a while and she promised to marry him when he brought home $50 (he needs that money to show her father that he's worthy of the marriage). He starts to rant off about "Kansas City" and how they have "ideas of the future" from automobiles to furnaces and new dance steps. Curly comes back shortly, mentioning that he hired that surrey in Claremore and he has to get it. He asks her who has his eye on Laurie, and Judd Fry (their "hired-hand" walks by), who comes back a minute later, saying that Laurie accepted his invitation to go with him. Curly "apparently" doesn't care too much and reminds Aunt Eller about their date before he leaves.
Shortly after he leaves, Aunt Eller and Laurie spot Ado Annie coming their way on the carriage of a peddler man, Ali Hakim, who had apparently sold an egg beater to Aunt Eller (which she isn't too happy with.) When Aunt Eller goes to talk Ali Hakim off, Ado Annie tells Laurie that likes Ali, soon to find out that Will Parker had come back from Kansas city. (She says she only told him that "maybe" she'd marry him.) She says that Ali says that he wants to marry her, but she doesn't have a good reason to choose either one of the boys, as she sings "I Cain't say no." Ali comes back a bit frizzled from Aunt Eller yelling at him, but he wants to sell Aunt Eller something to make up for the egg beater. (She isn't quite happy with anything that he has). He asks Laurie what she'd like. She lists anything from buckles to her shoe and perfume and something to help her make up her mind. He gives her the "Elixer of Egypt"-- "take a whiff of this and you will see everything clear".
Ado Annie asks Ali what he was talking about last night "how he wants to ride with her to end of the world". Judging from his explanation, she thinks that he wants to marry her, but he really doesn't want to. Will Parker comes back and starts to tell Ado Annie how he's missed her and starts talking "purty" to her so she'd like him.
When everyone gathers together to sing "What a Beautiful Morning", Laurie sees Curly with a common girl from across the river, Girty, who has an unmistakable laugh that'll drive you nuts. After they go off together, Laurie seems a bit jealous until a girl asks her about it, she says that she doesn't care. She starts to sing "Many a new day", explaining how she wouldn't become too attached to a man or cry if he went away, as she'd just move on if he ever let her.
After that song ends, Ali Hakim and Ado Annie talk about how she has to marry Will since he has the $50, when her father, Mr. Carnes, comes back around. She explains that he has the money, but spent it all on presents (which we will see later). He says that she can't have him if that's the case. Ali butts him, asking if that's fair, but ends up being roped in to the matter, when Mr. Carnes lets him marry her when she really doesn't want it. She goes off while he paces across the stage when all of the guys comes out. He sings in "It's a Scandal; It's an Outrage", that he doesn't want to be attached and have his freedom taken away. (Please note that this song can only be seen in the play verison of the musical, as it doesn't appear in the movie *).
Curly returns to the farm with Girty to see Laurie packing her hamper for the auction later. When Girty leaves, the two start talking about there are rumors about how he's "stuck on her". They start to sing "People will say we're in love", which is touching and gets Laurie thinking about how she wanted to go with Curly all along. At the same time, Curly goes off to Judd's smokehouse to talk to him about "men issues."
At the smokehouse, they start to talk about "how you don't know how much people like you until you're dead". Curly starts to sing "Poor Judd is dead", talking about what the funeral would be like, all the girls crying, and Judd buys into it later. Judd asks Curly eventually why he had come, but yells that he should keep away from Laurie. Ali Hakim shows up for a bit, trying to sell him postcards, but he wants a real woman. (Ali personally wonders why since they're "trouble") He asks if he wants Ado Annie, but doesnt', Ali says that he doesnt want her, but he got her. Judd starts to sing "Lonely Room", saying he wants a girl to call his own. (See note *)