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Simple English definitions for legal terms
at arm's length
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A quick definition of at arm's length:
Term: At Arm's Length
Definition: When two people or groups are not close or related, they may do business or make deals with each other. This is called an "arm's-length" transaction. It means that both parties have equal power and are not in a confidential relationship. They are not working together as friends or family, but as separate entities. This type of transaction does not create any special duties between the parties.
A more thorough explanation:
Definition: At arm's length refers to dealings between two parties who are not related or not on close terms and who are presumed to have roughly equal bargaining power. It means that the parties involved in the transaction are not in a confidential relationship and are dealing with each other as strangers.
Example: A company that is owned by a father and son may not be considered an arm's-length transaction because the parties involved are related and may not have equal bargaining power. However, if the same company is sold to an unrelated third party, the transaction would be considered an arm's-length transaction.
Explanation: The example illustrates that an arm's-length transaction involves parties who are not related and do not have a close relationship. In an arm's-length transaction, the parties are presumed to have equal bargaining power, which means that they can negotiate the terms of the transaction without any undue influence or pressure from the other party. This ensures that the transaction is fair and equitable for both parties.