As a contractor are you expected to supply all of your own tools?
Not necessarily, but if they ask you if you have that tool, and you say "yes", then they'll expect you to have that tool.
They made you a job offer as an independent contractor.
You agreed to that (it doesn't matter what happened beforehand).
You were asked if you had Office.
You said "Yes" to that as well.
At this point, you just need to bite the bullet. Either tell them the truth, make up some lie about your laptop being broken, or get your own legitimate licenses.
To get your own legit licenses, I'd suggest you create a company site for yourself and enroll in this program from Microsoft for startups. It's free for two years. https://startups.microsoft.com/en-us/
Having a sole proprietorship is fine, but you'll need your own domain and web site in order to be accepted in their program. This shouldn't cost you more than $20 if you do your research.
And in the future, please stop agreeing to everything. Especially at your young age, you do not want to be an independent contractor. Keeping track of your expenses, doing your own taxes, paying for your own insurance, negotiating your own contracts, and collecting on past due invoices. You can do all of that, but I recommend you do all of that later in life. When you don't know what you're doing, being an independent contractor is not as fun as it sounds.