What is the ruling on someone who agreed with a person to sell a watch at a certain price, assuming it had a defect, then it became clear to him that it was sound and he wanted to back out of the sale because its value is higher?

If a person sells something believing it to be defective, and then it turns out to be sound, the seller has no right to annul the sale (no khiyar). The seller knows the condition of his property, and he is not granted the option to annul even if the sold item turns out to be different from what he had presumed. Since it is established that the seller has no right to annul the sale, the default is that the transaction is binding. The way out for the seller is to ask the buyer for a cancellation (iqalah).