Contract

It was settled law that the identification of the non-defaulting party’s loss of bargain, arising from the termination of a derivative transaction, required a “clean” rather than a “dirty” market valuation of the lost transaction. That meant that the loss of bargain had to be valued on an assumption that, but for termination, the transaction would have proceeded to a conclusion, and that all conditions to its full performance by both sides would have been satisfied, however improbable that assumption might be in the real world. Thus, for the “value clean principle”, the conditions precedent as to payment, among other things, had to be deemed to have been satisfied. Otherwise no replacement transaction could be entered into, as there would be nothing to transfer to the new party, or only a transaction capable of being immediately terminated. The quotation was to be given for the replacement transaction on that basis. Quotations for replacement transactions were required