Legal Question in Business Law in California

Can a document storage company charge an early termination fee if there is nothing in the contract states anything about any such fee?


Asked on 4/25/16, 4:04 pm

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

They almost certainly cannot just make up some charge or fee that isn't provided for in the contract; however, if the contract called for you to pay storage charges for, say, at least 36 months and you canceled after 19 months, they could charge you for some or all of the additional 17 months, and they could call this an "early termination fee" or whatever. So, it'd be necessary to consider all of the payment provisions in the contract before deciding whether a particular charge was permitted under the contract or not.

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Answered on 4/25/16, 4:54 pm

I basically agree with Mr. Whipple. If you have an agreement for services for a specific period of time and agree to make payments for that period of time, and you terminate the contract early, that is a breach of contract. That breach of contract causes the company a loss of revenue they were entitled to recover from you, less their cost of providing the services you were to pay for. That right exists without the need for anything in the contract. The reason many contracts include early termination clauses is to avoid a fight over what the exact loss of net revenue is. The parties just agree in advance that if the contract is terminated early the agreed loss is $X. In the absence of an agreed amount they are entitled to charge you whatever they claim is their net loss, and you are entitled to dispute or agree with it, and if you and the company can't agree on an amount, they can sue you, in Small Claims Court if the amount they claim is $10,000 or less, and in Superior Court if it is more.

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Answered on 4/26/16, 9:55 am


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