At Lighthaven town, find an NPC called Jagar Kar (he is the Powerful Blow trainer, located in the house at the left of temple entrance). Say Sword of Fury and he will mention that he is looking to find one. Find a Sword of Fury (Goblin Warlords drop it), and return to Jagar Kar. Say again Sword of Fury and he will trade it for a Nightsword.

Note 1: In order to do this quest, you must first complete the Black Market quest. Note 2: You can do this quest as many times as you want.

Quest Reward Synopsis: Nightsword (65 Str, 30 Int, 25 Wis).