An arm's length transaction is one in which both parties are acting in their own best interest. That means they have negotiated fairly on price, and neither party is giving the other one a deal better or worse than the market would dictate because of an existing relationship between them.

Is at arm's length?

An arm's length transaction, also known as the arm's length principle (ALP), indicates a transaction between two independent parties in which both parties are acting in their own self-interest. Both buyer and seller are independent, possess equal bargaining power, are not under pressure or duress.

What does it mean to deal at arm's length?

An arm's length transaction refers to a business deal in which buyers and sellers act independently without one party influencing the other.