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The movie opens in the future, where Chuck De Nomolos (Joss Ackland) steals a time machine disguised as a phone booth, and then sends robotic duplicates of Bill (Alex Winter) and Ted (Keanu Reeves) back to the past to prevent their band Wyld Stallyns from winning the Fourth Annual San Dimas Battle of the Bands, and thus removing their influence on history. Rufus (George Carlin) attempts to stop De Nomolos' plan but ends up lost in time. In the present, Bill and Ted struggle with their band Wyld Stallyns; while former 15th-century princesses and current fiancées Elizabeth (Annette Azcuy) and Joanna (Sarah Trigger) have become skilled on their instruments, Bill and Ted are still inept. De Nomolos' clones capture Bill and Ted, and kill the pair by throwing them over a cliff, then take over their lives, including ruining their relationships with the princesses.
The real Bill and Ted find themselves facing Death (William Sadler), the Grim Reaper, who challenges them to a game for their souls. They realize they have no chance of defeating him, and instead give Death a "melvin" and flee. Bill and Ted try to find someone that can help them in their ethereal state, first by possessing Ted's father, Captain Logan (Hal Landon Jr.) and another police officer, and then by trying to call out as a séance held by Ted's stepmother Missy (Amy Stock-Poynton). However, at the séance, they are mistaken for evil spirits and cast down into Hell. The two are sentenced by Satan (Frank Welker) and forced to live their own personal versions of Hell. The two realize their only means of escape is to play the Reaper in a game for their souls.
The Reaper brings them out of Hell, and lets them decide which game to play. The pair select several games, including Battleship, Clue, electric football, and Twister, each time winning and requiring the Reaper to insist on a rematch. Eventually the Reaper acquiesces and lets the pair command him. Bill and Ted realize that they only way to face their robotic counterparts and get to the Battle of the Bands is to find the smartest being alive to build them a more powerful set of robots......
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