Where an ISDA provides that the “good faith” requirement is not limited to calculations, the courts may find that the obligation to act economically reasonably is not limited to the calculation of the amount of termination, but also applies to trade under the agreement.34 Experts from the parties agreed that it was more likely that the prices of a replacement transaction could have been obtained on September 16, 2008, the business day following the early termination, and the judge concluded that conclusion. The International Swaps and Derivatives Association, Inc., (ISDA), publishes two versions of its commonly used master`s contract, which sets out the terms and conditions for OTC derivatives transactions. They are: After the judge determined that the calculation of the loss of the defendant was not consistent with the master`s agreements and was not binding on Lehman, the judge considered what would have happened if a reasonable person in the defendant`s position had properly fulfilled his mission of finding loss under the master contracts. He considered that this finding should have been based on quotes or valuations for guaranteed replacement transactions from a date that is possible as soon as possible after the early termination date and that the valuations of Mediobanca and Goldman Sachs were both compliant with these requirements. A comparison between the 1992 ISDA and the 2002 ISDA is available on the ISDA comparison page. Template On or “as soon as possible” after the early termination date, any party that must make a calculation regarding the transactions to be discontinued must send a return containing such calculations to the other. The list of calculations must contain “reasonable details” about the calculations and information about the account on which any payments are to be made. The concept of “appropriate sower” is not defined, but is generally considered to be a data, offer and other valuation methods used to determine the amounts in the calculation statement. Payment of the termination amount is due on the date the notification is effective due to a delay and until the second business day after the notification of forfeiture comes into effect due to a termination event.
If there are a large number of completed transactions or if there are disruptions in the financial markets that make it more difficult or complicated to evaluate terminated transactions, a calculation may take several days or weeks after the early termination date. The amount of the “close-out” differs from that of the 1992 ISDA and is closer to calculating losses. As mentioned above, the close-out amount does not require the use of bids, but if this is the case, bidders must not have the “highest credit position” and there is no need to request at least three bids. An offer can suffice as long as it makes commercial sense. If several offers are solicited, they do not necessarily have to be obtained or, if they are economically viable, the highest or lowest prices can be used. In addition, quotes and market data can be obtained not only from “major distributors” but also from all other “distributors in the relevant markets, end-users of the product concerned, information providers, brokers and other sources of market information.” Like the 1992 ISDA, ISDA 2002 focuses on losses/costs or benefits associated with the conclusion of a replacement transaction by the determining party, in order to determine the final amount of a completed transaction or a group of futures transactions.