Eighteenth century Scotland. On the way to fight the English, the clan McLaggan rides to meet old adversaries the Glouries in their castle. The head of the McLaggans demands to see Glourie, the Laird. He taunts him, calling his son a coward who will not honour the Glourie name by fighting in the war. Glourie calls his son Murdoch, famous for his womanising, and sends him to war, telling him to strike down any McLaggan he sees. Glourie dies.

While searching for his enemy at the front line, Murdoch is hit by a rogue cannon ball and dies. His groom brings home his only remains - his hat - and lays it in the castle. In 'limbo' his father tells him he cannot be accepted into heaven as he died a coward. His ghost will be doomed to roam the castle at midnight until he tweaks the nose of a McLaggan, and makes him kneel before him and admit that one Glourie can thrash fifty McLaggans.

Two hundred years later, the current Glourie, Donald, has hit hard times and the castle is up for sale. He owes money to several local tradesmen who come to the castle to demand their due. Peggy Martin, American daughter of a grocery millionaire, happens upon the castle while driving in the area. Donald and the tradesmen see a possible sale as a way of paying off the Glourie debts.

Donald invites Peggy and her family to dinner. The tradesmen agree to extend Donald's credit and to serve the dinner. Peggy is enthralled by the story of the ghost, but her mother is terrified. Donald and the tradesmen try to keep Murdoch quiet. When midnight comes and no ghost appears (the housekeeper has put the clock back) everyone but Peggy is relieved. The Martins and the tradesmen leave.

Peggy returns and asks to stay the night. Murdoch appears and she thinks it is Donald playing a trick on her. He tries to kiss her and she runs away.

Next day, the Martins return and agree to buy the castle. Donald asks only for enough to cover his debts - £2,388. Mr. Martin wants to tear down the castle and rebuild it in the U.S. He asks Donald to supervise the rebuilding. Donald agrees so that he can spend more time with Peggy.

They all travel to America by ship with part of the house on board. Murdoch comes too. He appears to Peggy, who again mistakes him for Donald, growing confused by his mixed signals. Murdoch appears at a fancy dress ball and causes panic amongst the guests. Later, Donald introduces Mr Martin to Murdoch. Martin panics and tears up the contract of sale. He gets drunk, and wakes to see another grocery millionaire, Mr Bigelow, negotiating with Donald to buy the house and the ghost to promote his empire. Martin realises his mistake and offers more.

As the ship arrives in New York, the newspapers report the appearance of the ghost. By the time the castle is rebuilt, the existence of the ghost is widely questioned - Murdoch, who is afraid of the violence in New York, has not been seen.

Martin holds a dinner to open the castle and to try to resurrect the legend of the ghost. He convinces Donald to pretend to be Murdoch and to appear on his sign. To avoid his plan being discovered, Martin tells Peggy Donald has gone. Peggy is distraught.

Donald finds her on the terrace. Thinking he is Murdoch, she tells him she loves Donald. He promises that Donald will be back.

Donald hears a radio broadcast stating that the Glouries are not in fact a great Scottish family and that the ghost does not exist. He challenges Bigelow, and insults fly. Bigelow reveals that he is actually from a great Scottish family too - the McLaggans. Murdoch appears and frightens Bigelow into retracting his family insult, thus freeing himself to join his ancestors in heaven. Peggy and Donald live happily ever after.