Thorbjorn Oxmain heard of Atli and Grim having left home just when Gunnar and Thorgeir, the sons of Thorir of Skard, were with him. Thorbjorn was jealous of Atli's popularity and egged on the two brothers, the sons of Thorir, to lie in wait for him as he returned from Snaefellsnes. They rode home to Skard and waited there for Atli returning with his loads. They could see the party from their house as they passed Skard, and made ready quickly to pursue them with their servants. Atli on seeing them ordered his horses to be unloaded.

"Perhaps," he said, "they want to offer me compensation for my man whom Gunnar slew last summer. We will not be the first to attack, but if they begin fighting us we will defend ourselves."

Then they came up and at once sprang off their horses. Atli greeted them and asked what news there was, and whether Gunnar desired to offer him some compensation for his servant. Gunnar answered:

"You men of Bjarg, you deserve something else than that I should pay compensation for him with my goods. Thorbjorn whom Grettir slew is worth a higher atonement than he."

"I have not to answer for that," said Atli, "nor are you the representative of Thorbjorn."

Gunnar said it would have to be so nevertheless. "And now," he cried, "let us go for them and profit by Grettir being away."

There were eight of them, and they set upon Atli's six. Atli led on his men and drew the sword Jokulsnaut which Grettir had given him. Thorgeir cried: "Good men are alike in many things. High did Grettir bear his sword last summer on Hrutafjardarhals."

Atli answered: "He is more accustomed to deeds of strength than I am."

Then they fought. Gunnar made a resolute attack on Atli, and fought fiercely. After they had battled for a time Atli said:

"There is nothing to be gained by each of us killing the other's followers. The simplest course would be for us to play together, for I have never fought with weapons before."

Gunnar, however, would not have it. Atli bade his servants look to the packs, and he would see what the others would do. He made such a vigorous onslaught that Gunnar's men fell back, and he killed two of them. Then he turned upon Gunnar himself and struck a blow that severed his shield right across below the handle, and the sword struck his leg below the knee. Then with another rapid blow he killed him.

In the meantime Grim, the son of Thorhall, was engaging Thorgeir, and a long tussle there was, both of them being men of great valour. When Thorgeir saw his brother Gunnar fall he wanted to get away, but Grim pressed upon him and pursued him until at last his foot tripped and he fell forward. Then Grim struck him with an axe between the shoulders, inflicting a deep wound. To the three followers who were left they gave quarter. Then they bound up their wounds, reloaded the packs on to the horses and went home, giving information of the battle. Atli stayed at home with a strong guard of men that autumn. Thorbjorn Oxmain was not at all pleased, but could do nothing, because Atli was very wary. Grim was with him for the winter, and his brother-in-law Gamli. Another brother-in-law, Glum the son of Ospak from Eyr in Bitra, was with them too. They had a goodly array of men settled at Bjarg, and there was much merriment there during the winter.