How long do I have to terminate a contract without penalty when the other party changed the terms of that contract?

I have a 3 year contract with my merchant services company (based out of GA). A few months ago, they started charging me an additional monthly fee for PCI compliance. Now, I’ve been notified that they will also be charging me an additional annual fee to cover IRS reporting requirements. I can’t afford all of these fees and none of them were outlined in the contract I signed. Do I have the right to terminate my contract without paying the early termination fee? How long do I have to do so (I need some time to set up with a different company)?

Asked on September 7, 2011 under Business Law, Minnesota

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

A contract binds both parties; neither party may unilaterally change the terms of it, so the merchant services company cannoto increase your fees--any such attempt to increase them is illegal and should be ineffective--UNLESS the agreement itself provided for changes or modifications, or gave that party the right to make changes later. So the first thing you need to do is to double check the agreement--including any later amendments, supplements, etc. to it--to see if the merchant services company has the right to make these changes.

If the agreement(s) give them this right, they can do this and the contract has not been breached. If the agreement(s) do not give them this right, then by changing the rates they have breached the agreement, and this may indeed give you the right to terminate the contract without penalty (since changing the rates is sucha  core or material breach).


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.