Q: Can I fire a contractor at will if I find out he is unlicensed? Can he sue me?
A: This depends on the nature of the work. Most residential home improvement type work requires that the contractor have a CCB license. You can fire him if he is doing this work unlicensed. He could potentially try to sue you if you have a signed agreement with him- anyone can file a lawsuit. But I think you would have an excellent defense. If you don't have a contract then you can fire him at any time.
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