There is an old maxim that you should never get into a contract without the ability to get out of that contract. This is even more true with ERP-related contracts.
- How do you walk away from an ERP contract with SAP or Oracle when that contract no longer works for you?
- You may be unable to do it easily – especially if you failed to negotiate an expansive or flexible termination right.
ERP vendors like SAP, Oracle, and Infor offer discounts off the list price, expecting customers to purchase software for the duration of the contract.
- They often include language in their contracts obligating customers to pay a termination fee to get out of a contract early or an acceleration clause obligating a customer to pay all fees due and owing for the remainder of the contract term.
- Is this reasonable? Should you pay a termination fee? Do you have options?
Terminating an ERP software contract for breach is substantively different than terminating an ERP software contract for convenience.
- Terminating a contract for breach with an ERP vendor, especially Oracle, SAP, and Infor, is not as simple as sending a notice of termination.
- You need to document the basis for the termination, make sure your allegations of breach read on the vendor’s contractual obligations, and follow any termination and resolution obligations in the contract.
- You also need to ensure you document the vendor’s breach of contract and the vendor’s efforts to cure the breach.