contractor mistake

Bathroom re-do in teh new haus.  Got estimates from two contractors,
one of them
about $500 less than the other one.  Went with the low bid.

Turns out that the low bid was $500 cheaper than the other bid because
he missed
something when writing the estimate -- a lead pipe that needed to be
replaced.

So I pay for that, but!  There are gurgling problems with that pipe, I
call the city and it turns
out that the pipe
wasn't replaced according to code AND the contractor needed a
permit.


So we have to get this fixed.  The pipe can't be replaced without
tearing out walls.

How should we ask the contractor to fix this?  We don't want to wind
up in court (although
if we did, our position would be very strong -- our contract with the
contractor states
that permits would be bought ahead of time and everything would be
according to code)
and I think this was an honest mistake on their part, but I sure as
hell ain't gonna pay
them to fix their mistakes.  We paid T&M (time and materials) for the
unanticipated
work -- how about we only pay materials for the repair?