What defines agency in a legal context?

Agency in a legal context is fundamentally defined as a relationship where one party (the agent) acts on behalf of another party (the principal) to create legal relations with a third party. This relationship is characterized by the trust and authority granted by the principal to the agent, allowing the agent to make decisions and take actions that will legally bind the principal.

For instance, real estate agents act as agents for buyers and sellers in property transactions, representing their interests and negotiating on their behalf. This definition emphasizes the fiduciary nature of the relationship, where the agent is expected to act in the best interest of the principal and uphold their duties of loyalty and care.

In contrast, the other concepts represented by the other answer choices—such as a debtor-creditor relationship, a business partnership, or a contract between independent contractors—do not encompass the essential elements of agency, which specifically involves acting on another's behalf in a legal context. Thus, choice C accurately captures the essence of what agency entails in legal terms.