Here's a report of a face-to-face transaction gone bad.
In this instance, a person selling headphones through Craigslist was contacted and a face-to-face trade (at a McDonalds) was arranged. Except it didn't go according to the buyer's plan and the seller left with both the headphones and the bitcoins:
I just got robbed blind of bitcoins - in person. I'm feeling like I've lost trust in the usability of the currency and looking for advice. -
http://www.reddit.com/r/Bitcoin/comments/1b89wmHow did the seller get a hold of the BTC before the transaction was completed. Couldn't that kind of situation have been easily avoided ?
By the buyer sitting down with the seller in a safe open public area with lots of other people around such as inside the McDonalds restaurant.
And then releasing the payment of BTC to the seller through a laptop computer right then and there only after the transaction was completed.