While traveling along a road
The PCs come across two armed bands – one of elves, the other dwarves – screaming at one another and on the verge of violence. It seems the elves are hunters searching the wilds for dangerous monsters and more common game. The dwarves are a rag-tag local (and unsanctioned) militia who insist that the hunters are instead spies for the nearest elven community (this is actually true, though the dwarves came to this conclusion by suspicion rather than evidence. Besides which the elves would claim to be on a “fact finding mission” rather than admit to conducting any actual espionage).
Hostilities broke out between the two groups a few days ago and while nobody was killed, some on both sides were wounded, and hostages were taken. Tentatively, messengers on both sides approached to make arrangements for a prisoner exchange. The Pcs have stumbled into the middle of this negotiation, which has rapidly deteriorated. This might be the last straw, and if the PCs do not intervene – either to end negotiations amicably or to choose one side over the other – then the confrontation will likely end in mortal combat.
When roleplaying this encounter, be a real jerk. Both sides are hot tempered, angered at previous offenses both real and perceived, and behaving very childishly in an effort to squeeze out the better deal – out of pride if for no other reason. Take reasonable arguments and twist them around, throw out will accusations, set up straw man arguments, make ad homonym attacks – behave in a way that would make any Speech and Debate class professor twitch.
Have combat stats for both sides ready, and balance them so that either party would be a moderate challenge to the party. There is the possibility that the PCs could screw things up so catastrophically that both parties turn on them – making this combat a real challenge indeed. Otherwise they will be aiding either the elves or dwarves in a rather one sided engagement – which will hopefully be an appropriately hollow victory. After all, neither side has evil intentions; they’re just idiots.
Possible EXP and Rewards
Grant the party experience equal to a monster of their level. Treasure would be an unlikely outcome of this negotiation (though if it ends in combat, the loot might be significant). However, the PCs could easily earn some favorable opinions on one or both sides of the conflict; potentially leading to access to a community that is usually chilly to outsiders. Members of a satisfied party might serve as contacts in the future or provide information and leads to the PCs current or future quests.