If the computer was received broken, yes--you have to refund his money. He is only obligated to pay if they computer is received in working order; otherwise, he is not required to accept the delivery and may insist on his money back. It does not matter, vis-a-vis the customer, whether the computer worked when shipped--all that matters is its state when received.You may in turn be able to claim against Fed Ex, if you believe Fed Ex broke the machine. If Fed Ex is refusing to pay and/or is not honoring the insurance you purchased on it, you have the option of suing Fed Ex and trying to prove in court that they caused the damage, not you (i.e. the packaging was adequate) and therefore are liable.