There is a resolution center where a buyer can log his complain and concerns in an online form. The dispute is communicated to both the parties. In case the seller does not respond, the buyer may escalate the issue to a Paypal claim.

The Paypal officials review the case, gather all the information, work with both the parties and then give a decision. If the dispute is not escalated to a claim within 20 days, it is closed automatically.

Sometimes, there is a chargeback. The chargeback is a reversal of payment that has already been approved.

Buyers often request their credit card companies to reverse their transaction. Many reasons can be associated to this, but the main reason is that the merchandise is not received.

Chargeback can also be claimed when the merchandise received is totally different from the one ordered. At times, the credit or debit card numbers get stolen. To avoid any fraud, the buyers request for a chargeback.

Paypal disputes work very fine within the Paypal network. What happens if the network fails? This happened last October, when thousands of merchants were caught in a mess when the Paypal site did not function for over a week.

Not only did the customers get locked out of their accounts, many transactions were halted. The officials claimed that the fault occurred while the system was getting a routine up gradation.

You can take certain measures to avoid Paypal disputes. If you are selling online then you must clearly indicate your item's return policy. You must cover issues such as limits of your return or the exchange policy. The time limits, shipping responsibilities and restocking fees should be explained precisely.

It is always good to leave feedbacks about the buyers or sellers on your site. A negative or a positive feedback will help in making opinions about the buyer.

It is important that a horrible buyer is blocked or stay away from the site, so that there are no further Paypal disputes. eBay (the parent company of Paypal) helps its members by providing them with tools that can block or cancel bids of the suspicious or problematic buyers.

Always keep the documental proof of your shipping information. Such proofs are your best defense against Paypal disputes. So, if you have not started documenting, initiate now.