Arms-Length Transaction

An arm's-length transaction is a deal made between two parties who act independently and have no relationship or special connection. This ensures that both sides negotiate fairly and without any pressure or influence from one another. For example, if you sell your car to a stranger rather than a friend, it’s an arm's-length transaction. Such transactions are important in business and legal contexts because they help ensure fairness, proper valuation, and the integrity of the deal, minimizing the risk of fraud or conflicts of interest.