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


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).

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