"You Have To Keep Paying No Matter What" — Why That Clause In Your Oracle Financing Agreement May Not Be Enforceable In California

If your business financed an Oracle NetSuite ERP implementation through Oracle Credit Corporation or Oracle America, Inc. and received a collection demand from Banc of America Leasing & Capital, LLC or Bank of America N.A., or another bank, you may have been told that you must keep making payments even if the software was never delivered, never worked, or was sold to you through misrepresentation. There are ways to attack the clause under California law, but Oracle and its assignees have developed a clever scheme that shifts risk to the Oracle customer and gives Oracle leverage in settlement discussions.

When a NetSuite implementation fails — and industry litigation makes clear that this seems to happen with some frequency — Oracle customers quickly discover an uncomfortable reality. The company that sold them the software and promised a successful implementation has already sold off the right to collect their payments. Oracle Credit Corporation (OCC), Oracle's captive financing subsidiary or Oracle America, Inc. itself (collectively "Oracle"), assigned the payment stream to a third-party bank almost immediately after the contract was signed. That bank, often Banc of America Leasing & Capital, LLC ("BALC") or Bank of America N.A. ("BANA") or a Wells Fargo entity, now shows up demanding full payment and citing a clause in the financing agreement that says, in effect, you agreed to pay the Assignee no matter what. At last count since 2020, BALC had filed over 70 collections lawsuits in San Mateo Superior Court in California alone seeking to enforce these assignments against Oracle customers.

This clause — sometimes called a "hell or high water" provision or a "waiver of defenses" clause — is a deliberate piece of transaction engineering. Although we do not have the actual agreement between Oracle and the Bank of America entities (yet), it appears from public filings that Oracle monetizes the payment stream almost on day one, mitigating its own financial exposure for failed implementations and leaving customers with an ongoing obligation to a bank that claims it bears no responsibility for Oracle's performance. The practical effect of this arrangement is to exert enormous pressure on the Oracle customer—it finds itself fighting a battle on the one hand to get Oracle to right the project and deliver the promised solution, and on the other it faces a possible collections action and a hit to its credit. Third party banks pressing for payment give Oracle leverage in settlement discussions with its customer. This creates cash flow pressure and a tactical advantage for Oracle. The clause shifts risk and inconvenience to the customer but doesn't eliminate their legal rights against Oracle — it just makes exercising those rights more expensive and burdensome.

The question California courts must answer is whether that arrangement is actually enforceable. Legal arguments exist that it may not be.

What the Clause Actually Says

We are able to ascertain the language of the typical OCC Payment Plan Agreement from public court filings. Here is a screenshot of the actual clause, which was a part of an exhibit to a Complaint brought by BALC against an Oracle customer.

BALC's litigation position rests entirely on that clause. Its argument is that the customer pic contractually waived every defense it could ever raise against Oracle — fraud, breach of contract, failure to deliver — and that BALC, as assignee, is entitled to enforce that waiver. In legal terms, BALC is claiming the functional equivalent of "holder in due course" status: the right to collect a payment obligation free from any defense related to the underlying transaction. And indeed that is the argument that some of these Oracle assignees have raised in litgation against Oracle customers. Although the Oracle customer can still assert defenses in litigation against Oracle, it shifts the burden to the customer. It makes it risky for the customer to stop paying when Oracle fails to perform and thereby puts Oracle in the driver's seat.

However, BALC's argument may fail under California law for at least five independent reasons.

Why the Clause May Not Hold Up

The statute that could save BALC expressly requires good faith and lack of notice — conditions BALC cannot meet.

California Commercial Code Section 9403 governs exactly this situation: waiver-of-defense clauses in assigned financing agreements. It makes such clauses enforceable by an assignee, but only if that assignee took the assignment for value, in good faith, and without notice of the defense being waived. This is not a loophole — it is the core of the statute.

BALC has filed over 60 collection actions against Oracle customers arising from Oracle/OCC assignments in San Mateo County Superior Court alone. Multiple court cases, legal industry publications, and news coverage appear to document Oracle's pattern of overselling NetSuite's capabilities and failing to deliver working implementations. By no later than 2021, any institutional lender systematically acquiring OCC assignments had access to — and reason to know of — that pattern. That is because when the banks try to collect the customers explain that Oracle failed to deliver a working system, and the customers tell that directly to BALC or BANA when they try to enforce the assignment. The response—too bad. Pay anyway or face a contract where payments have been accelerated and a collections action. Under these circumstances where the banks are aware of a multitude of implementation failures with multiple Oracle clients claiming fraud, it makes any argument that these banks were innocent strangers to the transaction seem implausible. The statute that would make the clause work against customers may expressly deny the banks the benefit of it.

California Civil Code Section 1668 voids any clause that purports to exempt a party from its own fraud.

This statute is unambiguous: contracts that have the object, directly or indirectly, of exempting anyone from responsibility for their own fraud are against the policy of California law and are void. If Oracle's sales representatives misrepresented NetSuite's capabilities as multiple Plaintiffs in lawsuits against Oracle contend, then a clause in a subsidiary's financing agreement that requires the customer to keep paying regardless of that fraud is precisely what Section 1668 prohibits. OCC is either a subsidiary or affiliate of Oracle. BALC is OCC's assignee. Neither can stand at a greater legal distance from Oracle's fraud than Oracle itself.

The clause was procured through the same fraud it purports to waive.

Even setting aside public policy, a contractual waiver signed under the influence of fraudulent misrepresentation is itself voidable. No rational businessperson agrees, in the abstract, to pay in full for software that is never delivered. Court cases allege that customers signed these agreements because Oracle's representatives told them the implementation would succeed, that the SuiteSuccess methodology was proven, and that their industry's needs would be met out of the box. Oracle customers have alleged that those representations were false. If the entire contract — including the embedded waiver clause — was induced by that fraud, California law allows customers to rescind it on that basis.

The clause is unconscionable.

California Civil Code Section 1670.5 allows courts to refuse to enforce a contract clause that was unconscionable at the time it was made. Arguments can be made that the "hell or high water" clause satisfies both requirements. Procedurally, it appears in a pre-printed, non-negotiable financing form presented to a small or mid-sized business by one of the world's largest software companies at the tail end of a long DocuSign — there is no meaningful opportunity to negotiate. Substantively, a clause requiring unconditional payment even in the face of fraud, total non-performance, and a completely non-functional ERP system is so one-sided that it eliminates the most basic protection a contracting party has: the right to withhold payment when the other party doesn't perform.

California's Supreme Court has held that the more substantively oppressive a clause, the less procedural unconscionability is needed to strike it down. This clause is arguably about as substantively oppressive as commercial contract terms get.

Enforcing the clause would constitute unjust enrichment.

California does not permit a party to be enriched at the expense of another under circumstances where it would be unjust to retain the benefit. Allowing BALC to collect the full contract price for software that was never implemented — while the customer simultaneously had to find and pay for an alternative ERP system — would give Oracle and BALC the economic benefit of a transaction whose only consideration was never delivered. That is textbook unjust enrichment, and California law provides equitable remedies for it.

The Broader Picture

These five arguments are not alternative theories of the same claim — they are independent, stacking grounds for relief, each sufficient on its own. Together, they reflect a California legal framework that has never been designed to let one contracting party use a subsidiary and an affiliated bank to insulate itself from the financial consequences of its own fraud and breach.

The "hell or high water" clause is not meaningless in every context. If Oracle delivered a working implementation and the customer simply regretted the purchase, the clause would likely hold. But in the case of systematic misrepresentation, total implementation failure, and an assignee that knew exactly what it was collecting on, California law provides customers with a robust set of defenses — statutory, contractual, and equitable — to attack the provision.

Businesses receiving collection demands from Banc of America Leasing & Capital or Bank of America, N.A., arising from Oracle NetSuite financing agreements should not assume that the presence of this clause in their contract means they have no options. The law in California is more protective than Oracle and BALC's litigation posture suggests.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.