I am not sure I understand your situation. But, I assume that you made a sale, and when you were preparing the shipment, you discovered that the sold item was damaged. There are three options I can think of:
- If this were me, I would find the product somewhere else and drop-ship it to the customer ... I would look at Amazon, Walmart, other eBay sellers, etc.
- You can also cancel the sale ... I think this is what you are trying to do. But this is bad. If you want to cancel due to "out of stock", then you will be given a defect by eBay. Defects are bad. If you really want to do this, just go to your orders page, and on the drop-down menu on the far left of the item's listing, just select "Cancel order" with "Out of stock" as your reason for cancelling.
- A third option is to communicate with the customer to let them know what has happened. You can offer the customer the damaged item at a discount, or (if the buyer wishes) you can cancel the sale. If the buyer says to cancel it, then you could select to cancel the order "at the request of the buyer" ... the ethics of this are debateable.
