contract-law california business
If there was no written contract in the first place would a phone call be enough to terminate relationship with the other party?
<p>My friend's small business engaged in a relationship with another company that provides credit card processing service. They did not ask my friend to sign a written contract at the time of signing up for the service (she signed just Application Form). Since the service did not live up to my friend's expectations, she decided to terminate it.</p>

<p>First, she called them and verbally over phone told that she is terminating service (I don't know what exactly she said over the phone, but she expressed intent to terminate the service as soon as possible).</p>

<p>However, the customer representative insisted that she signs their companies' written "Termination Notice". In this Termination Notice they sneaked in condition that my friend has to pay them $840 as Early Termination Fee that was not disclosed at the time she signed up for the service. Unfortunately, she did not read the "Termination Notice", signed it and sent it. Now this company has charged from her bank account $840.</p>

<p>Since, there was no written contract in the first place that would determine contract termination process, <strong>would a phone call have been enough to terminate relationship with this company?</strong></p>

<p><strong>If yes, then would the written "Termination Notice" that she was fooled to sign after the phone call would be considered valid?</strong> To me it seems no, because the relationship between both parties should have already been terminated via phone call, because she said that she is terminating service and there is no contract that determines Termination notice needs to be in written form; Hence this Termination Notice could be considered as void because it does not have anything to terminate after phone call.</p>

<p><strong>In the answer to this question I expect to see how judge might evaluate the whole situation (especially the bold part where I asked questions)</strong></p>

<p><em>Note that I am trying to find a hole that I could use in how this fraudulent company deals with their customers. Also, my friend and I both know that she was very irresponsible by signing whatever the other party sent her</em></p>

<p>The contract will provide terms that dictate the means by which it may be terminated. Other than that, a contract may be terminated by:</p>

<ul>
<li>Completion - fulfilment of obligations</li>
<li>Breach - if a party breaches a contract the others may be able to terminate</li>
<li>Recission - if a party was for some reason unable to enter into the contract</li>
<li>Impossibility - if the terms of the contract are impossible to fulfil</li>
</ul>

<p>There is no general principle that a contract must be terminated in writing but generally this will be the case so that there is a written record.</p>

<p>The Termination Notice may be valid. The fact that the prior contract had been terminated may or may not be a factor. Names of a contract ("Termination Notice") may or may not be considered in its interpretation really, you could call a contract almost anything you want ("Exploding Unicorn Agreement") and if it is valid, it will still be enforced. This comes down to the terms of the contract. Your friend should seek legal advice because this will come down to a thorough reading of both contracts.</p>

<p>Your assumption that there was no written contract is probably wrong. Without having seen the application form, I can say that it almost certainly contained, or referred to, terms.</p>

<p>Those terms almost certainly included a procedure for terminating the contract. This procedure may or may not have allowed the customer to terminate via telephone. </p>

<p>The requirement to pay $840 was probably in the original written contract. Therefore it is not necessary to rely on anything in the termination notice form to create the obligation to pay $840. The obligation to pay $840 upon termination already existed.</p>

<p>Your question turns on the precise words of the documents exchanged. You can't get a satisfactory answer without posting copies of them.</p>

<p>I've commented to your question seeking some clarification.  This answer is without that clarification.</p>

<p>There are two questions called in your OP: (1) would a phone call have been enough to terminate the original agreement? and (2) if the phone call terminated the agreement, are the terms of the Termination Notice valid and enforceable?.  The short answer to both is that it depends on all of the relevant communications between your friend's business and the CC processing company (none of which is included in your post).  But my best guess is (1) No; and (2) No, but since the answer to (1) was "No" this is irrelevant.</p>

<p>A binding contract at common law generally requires an offer, acceptance, consideration, and mutual intention to be bound.  In this case, it is likely that the Application was an offer by your friend's company to do business with the CC processor on terms that they set out.  Those terms may have been printed on the back of the Application, or hidden somewhere on their website, or someplace else entirely.  When the CC processor agreed to do business with your friend's company, that was the acceptance.  The consideration on the CC processor's side was the promise to facilitate CC payments, and on your friend's side was the fee deducted from each transaction.  And the mutual intent to be bound was evidenced through the course of dealings of the parties.  It is irrelevant whether the entire agreement between the parties was ever written down or signed: that would provide good evidence of the contract, but it is not the contract.  The contract is just what the parties agreed to do.  My best guess is that the CC processor had terms someplace that included contract termination provisions.  Those provisions, in turn, had something like a minimum contract length, minimum earning provision, or a termination fee.  <em>That</em>, and not the Termination Notice, is what gave rise to the requirement to have a written termination and the deduction of a fee from your friend's business account.  If I am correct about those things, then the answer to your first question is "No": because the telephone call does not comply with the (potentially hidden) terms, it would not be sufficient to terminate the agreement.</p>

<p>But if there were no such terms, or if there were but they permitted oral termination of the agreement, then the Termination Notice was probably insufficient to authorize the payment.  The reason for this is the Termination Notice was almost certainly <em>not</em> a contract.  In particular, while your friend's company gave the CC processor consideration (the $$,) the CC processor did not give your friend anything in exchange under the Termination Notice.  Terminating the agreement was not valid consideration: the telephone call had already done that.  That means the payment was a gratuitous, and unintentional, gift.  Such gifts are not enforceable, and your friend should be able to dispute the charge and get the money put back.  But that's <em>IF</em> the telephone call terminated the relationship, and as I said above that IF is very, very unlikely.</p>

<p>The next question you might ask was whether something <em>else</em>, other than the telephone call, may have terminated the relationship.  The answer there is, "maybe".  In some jurisdictions, there are laws that protect consumers (even business consumers, like your friend's company) from lousy contracts, hidden terms, unfair and deceptive practices, and the like.  Sometimes these protections make such agreements automatically invalid, particularly if the method of entering into them was also unfair.  Other times the protections do not invalidate the contract itself, but provide for penalties against the ne'er-do-well that uses the bad tactics.  Your best strategy may be to track down the Application, any agreement terms, etc. and gather facts about how the service was advertised, what promises or representations were made, and the mechanics of signing up for the service.  Then talk to a local attorney about whether the agreements between the parties may have been "void" or "voidable," particularly for fraud, unconscionability, or violation of an applicable unfair trade practice or consumer protection statute.  Also ask whether there may be some remedy sounding in equity or tort for sharp practices, or statutory remedies.  If there are affirmative claims or defenses against the withdrawal, the best course is probably to have the attorney send a letter to the CC processor's registered agent explaining them and offering to settle. </p>
