I know that multisig (n of i) transactions provide a decentralised escrow mechanism. Let's say we have a 2 of 3 address. What happens if funds are sent to the multi-sig address and say the seller is hit by a bus before posting the adorable Hello Kitty™ mug that you bought?
Does the 3rd party simply sign a transaction returning the coins to the buyer?
What about the general case of an address where n == i? Are the coins lost?