S.H.
have you kept the parents fully informed as to the extent of their child's behavior? If not, this will not go well. I have found that it is better to meet with the parents & devise a system of behavior modification....& trying that for some time....before letting a family go. :)
Before you break your contract with this family, please ask yourself if you have done everything in your power to prevent these issues, address these issues, & have provided the family with adequate communication to understand the situation.
I, too, have a terror in my daycare. After years & years of working with kids, I fully understand & embrace .....the fact that there is 1 in each group. It is up to me to teach that child how to behave better, to teach the other children how to deal with each situation, & how to better expand my own ability to adapt with each child in my care.
With my terror, I make sure that he is fully-engaged before I transition to another duty (another diaper change, etc). I never leave him in the middle of the group....unless they're fully-focused on an activity. When I see his temper escalating....or his interest focus on another's activity, I stand "at the ready" to make sure he doesn't lose control of his own actions. He escalates quickly, so quite frequently, I am in "damage control" mode more often than not. But!....I use each & every event as a learning opportunity for all in the room.
The reason I am bringing all of this up....is because it is easy to feel defeat. Please be absolutely positive that you are truly not able to teach this child a better way to live. Please be absolutely positive that you are truly unable to continue with this child in your life.
As for approaching the parents, all I can say is that it needs to be a meeting just between you. Don't do it in front of the kids, nor any of the other parents. & pretty much, whatever you do, it will not go easy. Honesty is always best....& that goes back to whether or not they're fully aware of the extent of their child's behavior. Good Luck!
EDIT: Thanks for updating. I'm glad the mom is informed.