Arms length means basically anything that walks talks and looks like a duck is a duck. If you are doing a transaction and the seller is related to the buyer, or the loan borker is related to someone in the transaction, or a corporation owned buy the seller is the buyer. Stuff like that is not legitimately an arms length transaction. Another example might be buying a piece of property worth 100k for $10. noon e would believe that their was not some ulterior or side deal going on.
I keep hearing this term and I think I’ve got a good idea of what it is. But, I’d like to hear it from others. I tried legalwiz.com in his glossary section but couldn’t find anything on it. Also, the archives here just have threads with the phrase ‘arms length transaction’ but don’t go into detail about exactly what it is.
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 becomes important to determine if an agreement was freely entered into to show that the price, requirements, and other conditions were fair and real. Example: if a man sells property to his son the value set may not be the true value since it may not have been an “arm’s length” transaction.
Basically it means a transaction or event in which there can be “No taint posssible of a conflict of interest” -or- “No taint possible of any collusion between the parties involved.” It follows to what the courts call the “Clean Hands Principle” and this means that you are coming to the courts free of any conflict or collusion or taints and asking the courts to decide based on the truthful facts as presented to it. In other words…you are not hiding anything from anybody and your actions are above repute.