Excerpts from Books and Wikipedia
Finally, the garrison at Acre—with Saladin’s approval—agreed to a truce. The soldiers would surrender the city, their lives would be spared, and in return Saladin would release all of the prisoners he still held, pay a substantial sum over to the Crusader war effort, and also return the fragment of the True Cross that had been taken from Jerusalem during the conquest. The city duly surrendered. But on either Saladin’s side or Richard’s (depending on whose chronicles you read), the deal broke down. On August 20, Richard marched out nearly three thousand prisoners and slaughtered them within sight of Saladin’s headquarters. . . . The two generals met north of Arsuf . . . It was a devastating defeat for Saladin . . . Saladin would never face Richard in pitched battle again. . . . The terms, finalized and sworn to on September 3, 1192, imposed a three-year peace. . . . Christian-held land on the coast would be left alone; Christian pilgrims would be allowed to visit Jerusalem and other holy sites unmolested. . . . Acre was declared the new capital of the Kingdom of Jerusalem, which survived as a tiny Crusader territory on the coast that no longer included the city of Jerusalem itself." [Renaissance World, p. 171-3]