Arm's Length Definition

The description of an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side, or one party having complete control of the other. It is relevant for determining whether an agreement was freely entered into, and the price, terms, and other conditions were fair. For example, if a man sells property to his son the price paid may not be the true value since it may not have been an "arm's length" transaction.