>> What I feel is refusal of service should be done only as an extreme step 
(irrespective of whether the app is free or paid), and with utmost caution, 
unless you want to open yourself up to litigations. 

You forgot the requisite "IANAL." 

>> "By downloading and using this software...

There's no need to blather on in the EULA. This suffices:

"The Company reserves the right to terminate access to servers from any 
application for any reason without notice."

-John Coryat

p.s. IANAL

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