free software is software you don't have to pay money to use, it doesn't matter if you have access to the code or not.
source available means the source is available on request and with restrictions to keep it private. doesn't matter if the software is free or not.
> [common; also adj. open-source] Term coined in March 1998 following the Mozilla release to describe software distributed in source under licenses guaranteeing anybody rights to freely use, modify, and redistribute, the code. The intent was to be able to sell the hackers' ways of doing software to industry and the mainstream by avoiding the negative connotations (to suits) of the term “free software”.
http://www.catb.org/~esr/jargon/html/O/open-source.html
I looks like open source means more that just ability to read the code.
Dictionaries are descriptive, not prescriptive.
If someone uses a term like "open source" in a way that is clearly different from how you understand the word, that doesn't make them wrong. All it does it highlight a different perspective.
You can attempt to tell them that they are wrong to use the term that way. It's changing the topic and distracts from the point, so if that's your goal, go for it. Most people don't react well to it. You can think that they should be okay with it, but people don't tend to react well to that either.
it's your choice.
This is a daily thing in my experience, often internalized to the point I don't notice until reflecting later. It doesn't feel like friction to me. This is the unavoidable nature of trying to connect with someone using language.