Oracle Fusion Cloud: Early exit clause

Organisations invest significant resources—costs, time, and effort—when selecting their ERP solution and the necessary functionalities within the different cloud services. However, changes in the market or within the organisation may require an adjustment in the SaaS solution to use and would require a “Termination in Favour” clause. This clause allows for the termination of a service contract before its planned end date, providing credits for the unused portion. These credits can then be applied towards a new contract for a different module.

This clause offers several advantages for organisations using Oracle Fusion Cloud:

• Flexibility: This clause allows organisations to terminate the contract if certain predefined conditions are met. This flexibility is crucial for adapting to unforeseen changes in business needs or market conditions. For example, if a company undergoes a significant restructuring, the ability to terminate the contract without severe penalties can be invaluable.

• Risk mitigation: The "Termination in Favour" clause ensures that an organisation has a possibility to exit the agreement if the related service is under used, unused or no longer needed. This reduces the risk of being locked into a contract that brings no value.

• Cost control: If the services provided under the contract are no longer cost-effective or aligned with the company's strategic goals, the clause allows for termination, thereby avoiding unnecessary expenses. This is particularly important in dynamic industries where technology and business needs can change rapidly.

• Negotiation leverage: The potential for termination can motivate both parties to maintain high standards of performance and compliance. Knowing that the contract can be terminated if expectations are not met encourages a more collaborative and proactive approach to manage the relationship.

• Legal protection: A well-defined termination clause provides a clear legal framework for ending the contract, which can help prevent disputes and ensure a smoother transition. This includes specifying notice periods, termination fees, and other conditions that must be met, thereby reducing ambiguity and potential conflicts.

Consideration and best practices

Oracle may grant you this clause provided certain conditions are met. These may typically include:

• All fees paid: All ongoing bills from the initial order must be paid in full.

• New order: Organisations will receive a credit that can be used exclusively towards the cost of a new contract for a qualifying cloud service, referencing a valid Oracle Master Agreement. The service period and the annual net cloud services fees should be equal to or greater than the initial order.

• Qualifying cloud services: The services considered qualifying will be listed in the clause. Typically, Oracle will specify that they should be within the same pillars as the cloud services referenced in the initial order (e.g. Oracle Global Human Resources Cloud, Oracle Sales Cloud, Oracle Customer Service and Support Cloud, Oracle Marketing Cloud, Oracle CPQ Cloud.)

Effective date: The clause should specify the effective date of the termination. Usually, this will be the last day of the month following the month in which the notice was sent to Oracle. End-user organisations should ensure that any usage of the cloud service being terminated is stopped by this date to avoid a non-compliance.

Conclusion

The "Termination in Favour" clause in Oracle Fusion Cloud contracts provides end-user organisations with a valuable tool for maintaining flexibility and control over their ERP solutions. By allowing for the termination of a service contract under specific conditions, this clause helps organisations adapt to changing business needs, mitigate risks, control costs, leverage negotiations, and ensure legal protection.

However, the conversation around contract flexibility and management is far from over. As the business environment continues to evolve, it is essential for organisations to stay informed about other contractual mechanisms and best practices that can further enhance their agility and responsiveness. Exploring additional clauses, such as rebalancing clauses, and understanding their implications can provide even greater flexibility.

Moreover, as cloud services and ERP solutions continue to advance, new challenges and opportunities will arise. Organisations must remain proactive in their contract management strategies, regularly reviewing and updating their agreements to align with current and future needs.