<human>: Give me the gist of the text in a nutshell

Long story short - my wife an I purchased a cake for our son's 1st birthday party.  The cake was not cheap (by our standards, $500.00) - and they totally botched the order.  The outside of the cake looked like what we asked for, but essentially they did not give us the right kind of cake on the inside.  

The owner admits that they did not provide us the right kind of cake - but refuses to refund the purchase.  She has offered a 10% discount (the difference in price between what we purchased and what we received) and a free small cake in the future.  We told her that we are not interested in any other cakes from them, as they already messed up the first one (and the party).

We feel like a 10% discount is not fair, since the cake was not provided as per our agreement.  I'm considering refuting the charge with the credit card company - what should I know?  Assuming the credit card company allows me to refute the charge, will she be able to turn me over to collections?  I assume she can try to sue me?
<bot>: bought a cake - cake was wrong. Bakery won't refund, we want to refute the charge. What should we know?