Generally speaking, an unlicensed contractor cannot recover either under a breach of contract theory or an unjust enrichment theory. In short, the unlicensed contractor is out of luck. Indeed, even if he or she files a lawsuit seeking recovery, you may be entitled to the recovery of costs and sanctions for having to defend the suit.
Indeed, Michigan courts have drawn a fairly bright-line rule forbidding recovery for unlicensed contractors. The policy of the rule in general seeks to protect the public from unscrupulous contractors and those that don't know what they are doing. To further show how strong a rule this is, in one case, an experienced contractor who allowed his license to lapse was denied payment after completing an addition to a home. There was nothing wrong with the addition or the workmanship. But because the contractor was not licensed, his lawsuit was dismissed.
In any event, if you are sued, you should retain an attorney to further assess all of the facts and circumstances and to represent you fairly and competently. And if your business entity is sued, an attorney would be required for representation. I hope that this addresses your question.
Answered on Feb 13th, 2017 at 5:30 AM