Final answer:
Agency is a contract relationship in which an agent is authorized to make decisions and enter into binding agreements on behalf of a principal, reflecting the agent's ability for self-determination and authority.
Step-by-step explanation:
Agency is a contract relationship between a principal and an agent where the principal authorizes the agent to act on their behalf and to bind the principal in a legal or business capacity. The theory of agency is significant in various disciplines, including anthropology, philosophy, and business law. In philosophy, Taylor's theory of agency emphasizes that a free action is one initiated by the agent without a predetermined set of events causing it, highlighting the agent's capacity for self-determination. In the context of law and business, agency defines the framework within which agents make decisions and act, which impacts how contracts are interpreted and enforced. Social contracts and business contracts, while different in nature, both rely on the concept of an agent acting with authority to enter into agreements that have binding outcomes.