using BeautifulSoup:
from BeautifulSoup import BeautifulSoup
html = "<p><ul><li>Foo"
soup = BeautifulSoup(html)
print soup.prettify()
gets you
<p>
<ul>
<li>
Foo
</li>
</ul>
</p>
As far as I know, you can't control putting the <li></li> tags on separate lines from Foo.
using Tidy:
import tidy
html = "<p><ul><li>Foo"
print tidy.parseString(html, show_body_only=True)
gets you
<ul>
<li>Foo</li>
</ul>
Unfortunately, I know of no way to keep the <p> tag in the example. Tidy interprets it as an empty paragraph rather than an unclosed one, so doing
print tidy.parseString(html, show_body_only=True, drop_empty_paras=False)
comes out as
<p></p>
<ul>
<li>Foo</li>
</ul>
Ultimately, of course, the <p> tag in your example is redundant, so you might be fine with losing it.
Finally, Tidy can also do indenting:
print tidy.parseString(html, show_body_only=True, indent=True)
becomes
<ul>
<li>Foo
</li>
</ul>
All of these have their ups and downs, but hopefully one of them is close enough.
<ul>
is NOT ALLOWED inside<p>
, so your "fix" actually repairs nothing. – Wreckage