We hired a licensed contractor to demolish a full bath which was right in the middle of our basement and to build a half bath closer to the side wall so as to make more space in our basement. There was a vertical pipe in our basement which he thought was a vent and he showed the same in the plan submitted to the township. Also in the old bathroom, there was a vent stack coming out of the horizontal main sewer line but in the plan the new bathroom did not have such vent stack coming out directly from the main sewer line. The plan also showed that he was changing the vertical pipe which he had shown as vent and enclosing that inside a wall in the new bathroom with a accessible cleanout. The township inspector gave approval for the rough work and the contractor put up all bathroom walls. Four days later, we had a sewage overflow in our basement. The contractor brought one of his cousin to clean the sewer line and the cousin said that the vertical pipe was a drain and not a vent. Contractor looked flustered and he said we did not hire him to put a new vent and he just changed the existing pipes. Couple days later he came and opened the bathroom walls and put some new pipes and connectors but did not explain to us what he was doing. Now he is asking for more money for which we have already paid him and when we said it is unfair of him to ask for more money, he is saying we are in breach of his contract. We think that he is worried about his work and his credibility with the township and so he want to back off. Do you think that could be the reason? Also do you think he might have messed up our plumbing system? Do we need to get another licensed plumber to fix this mess? Should we tell the township inspector about the wrong plan our contractor submitted? We don't know what to do.

Should we tell the township inspector about the wrong plan our contractor submitted?

In my opinion yes. I would also ask for an inspection of the work at this time, before things get covered up. Also ask for explanation of what must be done to complete the work properly

Doesn't sound like he is installing a new vent. Sounds like he is rerouting a drain that he remove in error. His error, his fix, his expense.
Apparently he has to install a vent for the new bath, or he has to install drainage that he didn't expect to have to do.

he is saying we are in breach of his contract.

That's a bit ridiculous. If he doesn't complete the work contracted for he would be in breach. Everyone errors but he is suppose to be the professional, he is suppose to know.

There was a vertical pipe in our basement which he thought was a vent line and the cousin said that the vertical pipe was a drain and not a vent. you should have hired the cousin instead of the contractors. No vertical pipe in the basement is a dry vent. They all complain something.

If I were in your shoes I would first hire a licensed plumber to come in and check the work, the contractor has already done. If the work is found to be faulty. I would have it repaired and then sue the contractors and inspector who passed his job in the first ones.

Please keep me informed of any further progress. Good luck, Tom