Yes, I think you did unknowingly buy off on alot. These timbers were likely ungraded. Depending on the level of damage they may or may not make grade. That would be another one for next time. A structural timber here should be graded. If you are concerned as to whether the timbers are up to the design values and not comfortable making that decision, then a travelling grader would be money well spent. I don't think the supplier owes you anything but in good faith may be willing to swap out timbers that don't make grade.

I do agree that it feels like a bait and switch when I've seen the moisture content and "standing dead" claims meet reality in the customers eyes, its still caveat emptor in that area of trade unfortunately. It is your job to write any terms into the purchase documents. I don't mind any allowable "defect" or condition as long as the customer is informed and on board.