They are supposed to waive the top up if they know you have a monthly contract. Obviously they prefer the sales but personally I would have bought the phone online from a third party.
To be far all the networks an retailers like CPW want you to buy a top up when buying a phone.
If you buy a phone outright from O2, they presume it will be PAYG, hence the reason for the PAYG sim which they requested you top up. It's an antiquated method actually and should no longer be part of the purchase.
You would have been better buying from CPW.
NB: Edited due to misinformation 
You could have chosen to buy outright and not on PAYG at all.
Mind you, the store should have told you this.
I'd raise a complaint and you'll probably get your money refunded to your contract account.
