Clients can only send as many emails as the host chooses.
True, but even if you only allow 50 emails per email address, times the hundreds of accounts, you can end up with a decent number of spam emails sent per day. A couple of reports is all it takes to get a blacklisting, that will affect tens of resellers on the server.
Further more, spam is not the only problem that can arise. scams, phishing, copyright infringements, hack attempts, can all part of the free hosting game. Some hosts had enough of these to outright ban free hosting, but experiences can certainly vary, and other hosts may not have an issue with it.
Nevertheless, one must read the TOS carefully, and keep in mind that it can also change in time.