Pass the village watch and turn left down the path to an Essence of Strength and book on Codex 166: The Blackmarsh . Hug the western wall and run to the Essence of Dexterity; east from it is an Essence of Willpower . Head to the center of town and speak with Justice. You can side with him and charge the gates to start a fight with The First or speak with the Baroness first and make a deal with her. Either way a battle ensues, it ends when The First is defeated so gang up on him and crowd control the remaining enemies by either freezing or stunning them. If you sided with the Baroness temporarily then you get the following options:

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There are some nice stat boosting options here. You must battle The First either way whether you make an agreement with the Baroness or not.

• • You know blood magic? Teach us. (Unlock Blood Mage Specialization)
• • Make me healthier. (Increase Constitution by x)
• • Improve my magic. (Increase Magic by x)
• • Make me more cunning. (Increase Cunning by x)
    You are then thrust out of the Fade back to the Blackmarsh where Justice has somehow taken Kristoff’s body.