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That lovable know-it-all knucklehead Ernest P. Worrell, who is working as a janitor at a local college, meets a history professor named Dr. Abner Melon. After discovering an antique metal plate near a construction site, Ernest shows it to the professor who believes that it came from a giant Revolutionary War cannon called "Goliath", (named after the legendary biblical giant). Dr. Melon had previously been ridiculed by his peers for theorizing that the real Crown Jewels of England were stolen during the Revolutionary War and were actually hidden inside the long-lost cannon.
The two begin to search for the artifact near the construction site and eventually locate it inside an abandoned mine. Unfortunately, they are ambushed by historical antiquity collector and Abner's colleague Dr. Glencliff whom they then lead on an action-packed chase through the countryside. Things become more complicated for the twosome when British authorities hear about the incident and send a team of secret agents after them to retrieve the jewels. Abner's wife on the other hand is only after Ernest and Abner for the jewels. While everyone is hot on their trail, Ernest develops a deep friendship with Abner. After crashing the cannon into a forest, Ernest locates the jewels, not in the cannon's barrel as the legend describes but in the gunpowder kegs. After putting the crown on his head, he finds himself unable to remove it. Dr. Glencliff shows up, kidnaps Ernest and takes him to his clinic in an attempt to surgically remove the crown and kill him at the same time. Abner meets up with his wife and convinces her to help him save Ernest.
While at the clinic, Ernest manages to escape from the surgery room and lead Dr. Glencliff on a chase through the building. When Ernest has nowhere else to hide, he and Glencliff have one last fight to get the crown before Abner arrives with the police. At the last minute, Glencliff takes an axe off of the wall and attempts to behead Ernest. Just as Ernest is moments away from death, Abner bursts through the door and hits Dr. Glencliff over the head with the same antique metal plate Ernest found, knocking him out. Ernest realizes that Abner has saved his life and they both realize that they have gone from being adversaries to friends. At the same time, British authorities arrive and explain to Ernest that the crown must be taken back to its rightful home. Ernest explains that it won't come off his head and the authorities declare that whoever wears the crown is King of England. Fortunately for Ernest (and England), Dr. Melon removes the crown for Ernest by joking him about what is on his shirt, flicking Ernest in the face. It causes the crown to fall off Ernest's head while everyone laughs. This is followed by Ernest giving Abner a noogie while they argue about who would make a better king of England. The film wraps here with a not-so-subtle moral, being that friendship is more valuable than status or material wealth. It is unknown what happened to Dr. Glencliff. He is presumed arrested by the police.