I feel so bad.  Someone requested a book from me and when I pulled it down from the basket there was mild water damage on it.  Don't know how it happened.  I feel bad that a person requested it and I had to turn them down.  Does the person who was turned down get an email with the reason?  Or is it just something that happens without explanation? I wanted to message the person to explain but there was no way to do so.

I wouldn't worry so much about it.  When you turn down the offer, it will just go to the next person in line and the requester will get the book.  In order to PM them, you would have to accept the order, PM them and then cancel which is (IMO) overcomplicating the process.

Check your Transaction Archive - is it listed with a X going through it?  If yes look to the far right and click on the PM - you can send a message to the requester.

It wouldn't show in the archive if you were canceling a RC. 

ETA:  I agree it will roll over to the next person in line.  If this request was sitting for awhile (days) then I wouldn't mind receiving a PM.  If it were a few hours, the member may not even know that it rolled to next member in the FIFO line.

I always PM the person if they are ordering more than one book.  The books will roll over separately.  This gives them a chance to cancel any added books.

The credit and the transaction archives are great ways to find the canceled orders.

Does the person who was turned down get an email with the reason?

yes.  if you get a request and say you can't ship it, or cancel it after you've accepted, the requestor does get an email that includes the reason you typed into the text box.  i've had that happen a couple of times too, pull out a book and discover i hadn't noticed some damage when i posted it, or possibly just sitting in the bag for a year added damage to the spine.

the one time i felt bad about it was when i waited several days to accept the order, since i wasn't home when the order came in, and then i had to turn it down after looking at the book.  as long as yours wasn't the only copy in the system, they'll just get the next copy requested.

If it is the only copy in the system, you can PM the requesting member, explain what happened and offer the book to them as an unpostable freebie, if they would like to request another book from you and you would send the two together -- I often do that and sometimes the requestor will tell me that they are fine with the condition I described and to just go ahead and send it as usual, sometimes they do take me up on the offer and request another book. If there are tons of copies available, just let it go.

What Sally said :)