PayPal will only work with you on a refund if you purchased an item from EBAY or a merchant that accepts PayPal. If you just transfer funds to another person (friend or family) then you are on your own when you are using PayPal to complete a purchase. There is no bargaining available or way to report non-receipt on an item.
It has been my experience that PayPal will allow you to send money to a PayPal recipient as long as you have sufficient funds in your account. There is an exception, however. If you have you PayPal account linked to a banking account or credit card, PayPal will take the money on hand first, and draft your account for the balance. It takes a little longer if the transaction takes place on the weekend, so it's better to do it during normal business days during the week. Hope this helps you.