After the domain was transferred, the buyer contacted paypal, said the payment for the domain was unauthorized, and paypal returned the funds to the buyer.
The best practice that you should follow after receiving payments on Paypal is transfer it to your bank account, so that Paypal ha nothing to charge back. I have seen such cases for non domain issues too.
But can't as in this case, the seller complain to Paypal that it was a valid transaction and get his funds back? There should be some legal way out of this.
Paypal will only protect the seller of "tangible" goods. If it's something you can ship, you have protection. Otherwise, paypal won't help you :-(. Unfortunately, paypal is pretty risky unless you trust the buyer.
It is a risky business indeed. I only go through reputable webmaster sites to buy or sell. If the person does not have a review, I try to steer clear of them until they become established as a trusted person.
