Oracle Contracts - An Introduction

1.       What is a contract?

A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation in which there is a promise to do something in return for a valuable benefit known as consideration.

Since the law of contracts is at the heart of most business dealings, it is one of the significant areas of legal concern and can involve variations on circumstances and complexities. The existence of a contract requires finding the following factual elements

• An offer.
• An acceptance of the offer which results in understanding of two parties.
• A promise to perform and a valuable.
• A time or event when performance must be made.
• Terms and conditions for performance, including fulfilling promises. 

2.       Oracle EBS Contracts

In real life every organization, every business is closely working within the boundaries of contract laid between two parties. It can be a manufacturer and a dealer or an independent worker and an organization. In this case all happens within Oracle E-Business Suite.

In fact, contracts govern most businesstransactions. Companies rely on contracts to define:

Specific products or services that they sell or buy.

Terms and conditions that govern pricing, shipment, payment, quality, and othermutual business and legal obligations of the involved parties.

Oracle contracts provide common infrastructure components that will be uses across all the different modules that deal with contracts.

• Contract Terms Library
• Contract Terms Authoring and Printing
• Contract Document Management
• Contract Repository
• Contracts Workbench

 2.1.    Contracts Terms Library

Every organization deal with contracts and have a separate administrative and legal team that negotiates the contract and author them. Every year they work on a number of such legal documents and it will be a time consuming task over a period of time. Oracle’s Contracts Term Library provides feature that simplifies the task of documenting and maintaining these terms.

Organization having their presence globally uses such libraries and enforces them to be applied all over the globe. It also has feature of accommodate local regulations as well that give local authorities to amend as per country standards.

                Contracts terms library provides following features:-

• Create / Manage Standard Clause–Legal department and contract administrators create clauses that contain standard business terms used in the contracts. Legal people can create clauses as per business needs and route them for approval. Once approved it can be published for use across the organizations. Clauses can be modified by creating a new version.

• Create / Manage Contract Expert Rule – Contract expert is a rule based contract authoring tool that helps organizations define their policies to select additional clauses automatically during authoring and report how contracts deviate from their standard process. We have two rules –

o   Clause selection rules

o   Policy deviation rules

• Create / Manage template – Organizations implement best practices by creating standard contract template based on their day to day contracting needs. It facilitates easy creation of contract authoring that minimizes the overhead in authoring, legal review and approval.

 2.2.    Contract Term Authoring and Printing

Oracle contracts core facilitates comprehensive authoring capabilities integrated with service, procurement or sales business flows.

For example Oracle Sales Contracts, provides contract term authoring available via Quoting and Order Management. We can also publish our contract term over our iStore. Similarly with Oracle Procurement contracts we can author contracts term in Sourcing and Purchasing. Also we can negotiate contract terms with our supplier using iSupplier portal.

Some of the standard features are as follows:-

• We can use preapproved templates defined in the library to quickly author initial versions.
• We can make offline changes to the contract term by downloading it into a word document and uploading after modifications.
• Review contract deviations from standard predefined contract terms.
• Preview and print contact terms.

 2.3.    Contract Document Management

Creating and maintaining contract version is time consuming and tedious task even its stored electronically. Oracle contracts provide a central repository that can be accessed by users across the globe. Users can also load signed copies and other supporting stuffs into the repository. Since its easily accessible user can find any version of the contract.

2.4.    Contract Repository

Contract repository enables us to create miscellaneous contract like license agreements, merger agreement which are not specifically falls under Oracle contracts application. We can also create sales of purchase agreement which do not fall under standard sales or purchasing flow that does not require the full execution capabilities provided by application.

2.5.    Contract Workbench

Contract workbench provides single and unique view of all the organizations contracts for effective management. It gives us access and visibility to all the contractual agreements in the organization.

Contract workbench provides extensive search capabilities, provides details of which contract requires attention and has link to common task like creating a copy of contract, renewing contract and approving it. It also comes with security features which restrictuser’s only view contracts.

3.       Oracle E-Business Suite’s contract management solution

Modules in Service Contracts

 3.1.    Oracle Service Contracts

Oracle Service Contracts provides a complete contract authoring execution solution to manage warranties, extended warranties, usage, subscription services etc from its authoring, approval, billing or termination or renewal of entire contract or specific part of the contract.

• With Oracle Service Contracts we can:
• Sell different types of service to organization or end consumers.
• Define pricing and billing schedules for flexible billing and payment.
• Automate renewals for recurring revenue opportunities
• Simplify change management for existing contracts.

 3.2.    Oracle Sales Contracts

Oracle Sales contracts is an essential entity for businesses where the terms and conditions of business transactions are defined and are legally binding on both parties. The Sales Contracts functionality is a vital part of business processes like quoting, ordering, and negotiating long-term agreements.

Oracle Sales Contracts enhances the ability of sales organizations to manage their contracts by adding sophisticated contract management and compliance features to Oracle Quoting, Oracle iStore, and Oracle Order Management.

In a typical Sales contract business flow it goes through following steps:

• Establishing contract term that govern the standard business policies and procedures.
• Authoring and Negotiating contact with customer.
• Approval of the contracts upon successful negotiation.

 3.3.    Oracle Project Contracts

Oracle Project Contracts supports the contract management needs of project centric organizations those rely on comprehensive project management capabilities to sustain in business which includes commercial and government contractors, agencies, and subcontractors. These organizations operate in a project driven environment characterized by:

• Changing contract specifications.
• Volatile demand and long lead-times.
• High percentage of procure-to-contract components and services.
• Contractual requirements for billing.
• Compliance of government regulations.

Executive and operational management constantly face issues of budgetary constraints, contract margins, risk management, flowdown of contract information to subcontractors, and prioritization of contract deliverables. Oracle Project Contracts is designed to address these business issues by providing a comprehensive contract management

 3.4.    Oracle Procurement Contract

Most of organizations rely on procurement of goods or services to run their business smoothly. Procurement contracts play a critical role in all businesses. Companies rely on procurement contracts to define:

• Specific goods or services that they buy.
• Contract terms governing their price, shipment, payment, quality, and other mutual obligations of the involved parties.

Oracle Procurement supports the basic business processes of the procurement contract life cycle. Oracle Procurement Contracts enhances the ability of buying organizations to manage these stages by adding sophisticated contract management and compliance features to Oracle Purchasing, Oracle Sourcing, and Oracle iSupplier Portal.

 3.5.    Oracle Lease Contracts

Oracle Lease contracts have been renames to Oracle Lease and Finance Management that provides end-to-end automation and a foundation for growth of your lease and loan portfolio. Designed for asset-based finance companies spanning the entire lease life cycle, Oracle Lease and Finance Management is a comprehensive application that leverages the power of the Oracle E-Business Suite to help equipment financers increase revenues through using IT as a strategic differentiator, enabling them to implement and accomplish strategies to:

• Expand business in existing and new markets
• Focus on business relationships with customers, vendors and investors
• Manage risk-based returns
• Improve asset management capabilities