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another for monetary damages even if the purported a contract when an ISO or agent stops bringing them
harm was the fault of a third party (for example, business," Monroe said. This is never a good idea.
a merchant). These should be limited to "direct
damages," like out-of-pocket costs, and not inclusive Reasons for terminations should be clearly stated
of "special damages," like loss of profit, Targen noted. in the contract, and advance notification is a must.
"It's important that agents not be put in a position of
• Breach of contract. A small ISO should never be having to react in a panic," Targen said. "Four to six
shut out of a contract because of one employee's months advance notice of termination allows them
mistakes. Provisions for remedying these problems, enough time to get something else in place."
such as terminating the errant employee, should
be clearly spelled out in contracts. "A breach of one • Responsibility for setting, changing merchant
employee should not constitute a breach of the entire fees. Typically, it's the responsibility of upstream
agreement," Targen said. ISOs or processors to set fees, but assurances can be
had. "Confirm in your agreement that the processor
• Responsibility for merchant fraud, data breaches. cannot change the fee arrangement or add new fees,"
This is generally not a consideration, as most small Targen said.
ISOs and MLS have "no risk" agreements with
upstream partners that protect against liability for For more insights into issues associated with ISO/MLS
merchant fraud and data breaches. But it's a good idea contracts, check out the Legal Ease column by payments
to ensure this is clearly articulated in the contract. attorney and long-time Green Sheet contributor Adam
"They need to make absolutely certain the ISO or Atlas. His most recent article associated with this topic,
agent is not going to be held liable," Targen said. "ISO contract management in the digital age," is in our
archives at www.greensheet.com/emagazine.php?issue_
• Termination provisions. Termination clauses can number=180601&story_id=5727.
profoundly impact an ISO's or MLS's business, so
be sure reasons for termination or cancellation are Patti Murphy is senior editor at the Green Sheet and president of
clearly articulated. "Some companies will terminate
ProScribes Inc. Follow her on Twitter @GS_PayMaven.

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