20. If the contractor sues the resident for breach of contract, how is the court likely to rule?

B is correct. If a party is prohibited from doing an act because of his failure to comply with a licensing requirement, any agreements to do that act is unenforceable on grounds of public policy if: (i) the requirement has a regulatory purpose; and (ii) the interest in the enforcement of the promise is clearly outweighed by the public policy behind the requirement. Restatement (Second) of Contracts § 181 (1981). Here, the regulatory purpose of the licensing fee was to raise revenue. The licensing requirement was not created to protect the public welfare. Thus, even though the contractor was prohibited from doing home-repair work within the city limits without paying the licensing fee, the contract will still be enforceable because the work was satisfactory and enforcement would not violate the purposes of the licensing requirement.

A is incorrect. The contract does violate the law because the contractor was doing home-repair work without paying the licensing fee. However, the contract is not void because the subject of the contract is not illegal or against public policy.

C is incorrect. The contract is not void because the subject of the contract is not illegal or against public policy.

D is incorrect. This is a misstatement of the facts because the contract does violate the law; the contractor was illegally doing home-repair work without paying the licensing fee. However, the contract is likely enforceable because the regulatory purpose of the fee was to raise revenue and enforcing the contract would not violate public policy. Thus, the court will allow the contractor to recover what is owed to him according to the terms of the contract.