You're correct - It's bugged 0.0 Thanks for finding that.
I've now fixed it in the current development build, but that build is about 65% of the way through a complete overhaul of a bunch of the games backend (mostly with implementing the full combat system) so unfortunately I can't really publish a fix for it until that's done (or I'll break WAY more things than just that one fight...).
It IS localized to that one fight though, and doesn't prevent progression if you win on the first attempt - so loading a save to get past it should work fine in the mean time. Feel free to comment if you have any further troubles or need a different solution though, and thanks for trying out my game!