If something goes wrong, users can cancel a transaction by clicking the dispute button and ask for a refund.
How to issue a refund
The seller can issue a full refund to the buyer from their PayPal account. This means they need to log in at paypal.com, find the correct transaction and click full or partial refund depending on the case.
If the marketplace charges a commission fee, that is transferred from the seller to the admin right after a successful purchase. It means that if the whole transaction needs to be canceled and refunded, the admin also needs to refund the commission part to the seller first (by similar way logging in to paypal.com and issuing the refund for the correct commission payment.)
Is the PayPal payment processing fee refunded?
PayPal will refund the percentage portion of their fees for both transactions, but not the fixed fees. This means that, for each refund, both the marketplace administrator and the seller will lose the fixed fee (which is $0.3 in the US, £0.2 in the UK, etc - see the fixed fee of your country here).
Benefits from PayPal protection
When users use PayPal, Sharetribe's payment system, they are usually eligible for PayPal buyer & seller protection in case something goes wrong. See https://www.paypal.com/us/webapps/mpp/paypal-safety-and-security for more information. (The protection program terms and conditions may vary slightly from country to country, so make sure to check your own country's PayPal terms, as the above link might not redirect you accurately.)