They joined forces, and the prince encamped on the heights of Peilau. Scarcely had this junction been effected before the Austrians, under Daun, Lacy, and O'Donnel, entered among the mountains on the 16th of August, 1762, and after a skirmish at Langan Bielau, encamped with forty battalions and forty squadrons close by; while General Beck, another Imperialist, occupied the Kletchberg with twelve battalions and twenty squadrons. All night the Prussians were under arms; their cavalry bitted and saddled, their muskets loaded, and port-fires lit; every trooper slept beside his horse, and each gunner by his cannon. Daun assailed the Prince of Bavern in his position with great impetuosity. Lacy passed the village of Peilau with six battalions, which he skilfully kept concealed behind a hill whereon his artillery were posted. To cover his left flank, O'Donnel marched forty squadrons directly from Peilau, and three times his Imperial cuirassiers were repulsed from the valley, and by a volley of grape from fifteen six-pounders his confusion was completed. O'Donnel, with the loss of 1500 dragoons, fell back, and thus exposed the left flank of Lacy, who, after making great efforts to storm the heights occupied by the foe, was compelled to retreat; and next day Daun retired by Wartha and Glatz to Scharfneck, where he remained till the close of the campaign.
This was the last military service of importance performed by Marshal Count Lacy at that time; for soon after, the war came to a close, by the treaty of peace, signed in February, 1763, by which it was agreed that a mutual restitution of conquests and oblivion of injuries should take place; and that Prussia and Austria should be put in the same position as when the hostilities began; and thus happily ended this truly atrocious strife, in which nearly NINE HUNDRED THOUSAND SOLDIERS PERISHED. Prussia fought ten pitched battles, and lost 180,000 men; Russia, four great battles, and lost 120,000 men; Austria, ten battles, with the loss of 140,000 men; France lost 200,000; Britain, 165,000; Sweden, 25,000; and the Circles 28,000; while Austria found herself encumbered by one hundred millions of crowns of debt!
For fourteen years Lacy led a life of peace, devoting himself to the development of discipline in the Austrian army, till the death of the Bavarian Elector, on the 30th December, 1777, opened up a new prospect of aggrandizement to the Imperial Government, and again lighted the torch of war in Germany. The Elector Palatine, the Elector of Saxony and Duke of Mechlenburg-Schwerin laid claim to the vacant Electoral hat; but their voices were lost when the formidable and covetous House of Hapsburg also put forth a demand, and the Emperor Joseph and Marshal Lacy appeared with 100,000 men, and an immense train of artillery, at the celebrated position of Konigsgratz, above the confluence of the Adler and the Rhine.