The best way to overcome this is to get rid of emotion between the two parties so that you can minimize loss for both of you. First, arrange for a meeting with your contractor, negotiate a win win situation, deal with fairness on both side, avoid over confrontation and deal with a calm manner. Listen to their problems and make sure they listen to your probs too. If neccesary bring along both parties legal(your appointed lawyer) person to eyewitness this. Out of court settlement is the best solution to this.