Agree with Jane... I'd run fast. The "breeder" (and yes, even if they have two pet dogs they want to throw together, that makes them breeders) doesn't follow the law because they're not licensed? This is a great example with what's wrong with the "licensing"... BYB's won't follow the rules anyways. This is not someone you should be giving money to. If any problems arise in the future with the pup, you can count on these people offering zero support or help.
I seriously doubt they're even aware of any laws like that. I truly believe they are trying to do things right. I never even knew there were laws like that. I looked it up and there is no applicable law, in this instance, where I live though.
I have, however, been burned on judging people in the past!!
**grumbles under breath about a lying, fraudulent insurance adjuster/company**