She will surrender/submit when she gets down low enough in hit points. You must have gotten a critical hit right before she was going to surrender. I've played that scene several times and got her to surrender every time but the first. If you're playing a mage, you have to be very careful what spells to cast on her. Extended duration spells are a DEFINITE no-no. I ended up killing her the first time when repeated castings of Melf's acid arrow got her.
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“Every tavern’s an opportunity, I say.”
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