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In my opinion, it is unlikely that the contractor would be arrested and charged with extortion. As I see it, there are a couple of problems with such a prosecution.
First, extortion requires an intent to obtain money or services from another person through coercion. Here, the contractor could easily state that the job became more expensive for whatever reason. Assuming this to be accurate, it would be extremely difficult to prove otherwise.
Another problem is that law enforcement would likely consider this civil, not criminal, and not make an arrest. One could easily argue that this clearly could be handled in civil court as there is a contract between you and the contractor and he appears to be in breach of that contract. For these reasons, I suspect that law enforcement would be unwilling to consider this to be criminal in nature and would not consider it to be extortion.
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