Definition: is a type of deal made between two independent and unrelated individuals or organizations that both follow their personal interests and try to achieve the most profitable outcome possible. Such dealings also serve as mean for measuring fair market value, as they’re struck between a buyer and a seller that never had a substantial relationship beforehand and thus won’t be willing to compromise easily or think about the benefit of the other party. In contrast, transactions that occur between relatives, parental and subsidiary firms are defined as arm-in-arm deals.
In a Sentence:
The accounting department is just finalizing the last details of the arm’s length transaction between our firm and our new paper supplier.
Based on the information available about the arm’s length transactions conducted during the last year, John concluded that the fair market value of apartments situated in the central district has risen significantly.
Since the buyer of Elizabeth’s car hadn’t met her previously and they both haggled over the price for quite some time, there’s no doubt that it was an arm’s length transaction.
Synonyms and related words: fair market value, accounting principle, arm-in-arm transaction, commercial value, contract law