Final answer:
The excerpt suggesting events occur in Peyton Farquhar's imagination is the one describing trees as giant garden plants with an order in their arrangement and fragrant blooms, revealing a dream-like perception.
Step-by-step explanation:
The clue that certain events occur in Peyton Farquhar's imagination rather than in reality can be found in the excerpt: "The trees upon the bank were giant garden plants; he noted a definite order in their arrangement, inhaled the fragrance of their blooms." This sentence suggests a heightened, almost surreal perception of reality, which is indicative of a dream-like or hallucinatory state. The reference to the trees as "giant garden plants" with a "definite order" in their arrangement and the ability to inhale their fragrance highlights a sensory experience that is unlikely to occur during an actual escape scenario, especially considering Farquhar's condition and the physical stresses he is under.