If a customer does not meet the terms of a contract, a penalty is applied. Each Contract Term must have at least one associated Penalty. There are five types of Penalties: Fixed Fee, Minimum Fee, Multiplier Fee, MRC Multiplier Fee, and Prorated Fee. See the Penalty Types Calculation table to determine which Penalty types can be assigned to the Contract Term types.
Fixed Fee
The Fixed Fee Penalty is the amount specified in the Penalty Amount field of the Contract Penalty screen. The amount of the Fixed Fee is added to the customer's invoice. This penalty may be used with all term types. When used with the Term Commitment term type, this can also be referred to as a one-time fee since breaking a term-commitment contract can happen only once.
Minimum Fee
The Minimum Fee Penalty is the difference between the Term Value (the amount the customer agreed to maintain) and the actual usage for the billing period. If the actual usage is less than the term value, that amount is added to the customer's invoice. This penalty is used only with the Minimum Guarantee Term Type where units must be currency.
Note
The Amount of a Minimum Fee Penalty cannot be overridden directly, since it must always equal the Term Value of its parent Contract Term. It is possible to change the value indirectly by overriding the Contract Term value itself.
MRC Multiplier Fee
The MRC (monthly recurring charge) Multiplier Fee is the sum of the associated product charges multiplied by the number of months remaining on the broken contract and then is added to the customer's invoice. (See Contract Associations.) The Penalty Value of this Fee displays as “calculated from assigned products” since the value is not known until it is calculated at billing time. The products' charges are prorated so the customer will not be overcharged or undercharged if they start or end the contract in the middle of a bill period. This penalty is used with the Term Commitment term type only.
Multiplier Fee
The Multiplier Fee Penalty multiplies the Penalty Amount by an associated entity (such as the number of services the customer is short by in a Service Count Commitment) and then adds the result to the customer's invoice. This penalty is used with the Minimum Guarantee and Service Count Commitment Term Types.
Prorated Fee
The Prorated Fee Penalty is the amount of the specified fee, prorated by the time remaining on the term commitment. The ratio used is Time Remaining/Duration of Contract. The Prorated Fee Penalty is only used when a term commitment is broken.
See also:
Hybrid Penalty