New contract - you pay for the space period no matter how many of the hours you use. Release and replace. At minimum you should be able to find another school age child needing B/A or even have the opportunity to fill with a full time or two part timers. She sounds like she has no reason to pull her child given that you have already planned on him and she is goading you into either agreeing to her demands or letting her go so she can go to her friend's daycare. For the dab you would lose compared to the hassles I would say fine if your friend's daycare is so much better than maybe you should go there. As of XXXX date you no longer have a space in my daycare.