All the stories are from ‘Icelandic Legends’:  Translation of Powell and Magnusson.

THE MERMAN

Long ago a farmer lived at Vogar, who was a mighty fisherman; and of all the farms about, not one was so well situated with regard to the fisheries as his.

One day, according to custom, he had gone out fishing; and having cast down his line from the boat and waited awhile, found it very hard to pull up again, as if there were something very heavy at the end of it.  Imagine his astonishment when he found that what he had caught was a great fish, with a man’s head and body!  When he saw that this creature was alive, he addressed it and said, “Who and whence are you?”

“A merman from the bottom of the sea,” was the reply.

The farmer then asked him what he had been doing when the hook caught his flesh.

The other replied, “I was turning the cowl of my mother’s chimney-pot, to suit it to the wind.  So let me go again, will you?”

“Not for the present,” said the fisherman.  “You shall serve me awhile first.”  So without more words he dragged him into the boat and rowed to shore with him.

When they got to the boat-house, the fisherman’s dog came to him and greeted him joyfully, barking and fawning on him, and wagging his tail.  But his master’s temper being none of the best, he struck the poor animal; whereupon the merman laughed for the first time.

Having fastened the boat, he went toward his house, dragging his prize with him over the fields, and stumbling over a hillock which lay in his way, cursed it heartily; whereupon the merman laughed for the second time.

When the fisherman arrived at the farm, his wife came out to receive him, and embraced him affectionately, and he received her salutations with pleasure; whereupon the merman laughed for the third time.

Then said the farmer to the merman, “You have laughed three times, and I am curious to know why you have laughed.  Tell me, therefore.”

“Never will I tell you,” replied the merman, “unless you promise to take me to the same place in the sea wherefrom you caught me, and there to let me go free again.”  So the farmer made him the promise.

“Well,” said the merman, “I laughed the first time because you struck your dog, whose joy at meeting you was real and sincere.  The second time, because you cursed the mound over which you stumbled, which is full of golden ducats.  And the third time, because you received with pleasure your wife’s empty and flattering embrace, who is faithless to you, and a hypocrite.  And now be an honest man, and take me out to the sea whence you brought me.”

The farmer replied, “Two things that you have told me I have no means of proving; namely, the faithfulness of my dog and the faithlessness of my wife.  But the third I will try the truth of; and if the hillock contain gold, then I will believe the rest.”