Want to immediately terminate!

Happy very first birthday to your daughter! How awesome.

Marie, what can they do? They breached your contract. You gave them warning. You did everything correctly. Don't fret!

With out question I would terminate.

Yikes, Marie.... that was a winner of a family, huh?? :blink:
Good riddance to bad rubbish, I say. I am guessing that this is the wipe-counters? It sounds like you never meshed as a good working relationship from the beginning. When it comes to her taking the original contract, etc I would think it's so that she feels like she's covering her own bum. However, just to be safe, I would document everything that has happened with them up to this point and put it all into their file. Better to be safe than sorry if they come at you a month or more from now. By then you may not remember all the little details like dates, etc.
Atta girl to you for standing up and saying that this is not acceptable. Now enjoy your day off, and happy birthday to your little princess!!

PS> Thank heavens she actually paid, too! I find that the people who are like this are usually the ones who will try to stiff you....

On the other side of the contract issue. Because there was no notice given by the parents and it sounds like they were planning to leave anyways, by asking for the contract she maybe thinks that that prevents you from having proof of what they signed.

Terminate! No question.