In finance, a principal is a sum of money owed as a debt, upon which interest is calculated. In Power
of Attorney and Health Care Directive documents, the principal generally refers to the person who is
creating a document, such as a power of attorney or a health care directive. The principal is the
person who will be requiring someone else to act on his or her behalf. The principal must be an adult,
and must be “sound of mind” and capable of making his or her own decisions at the time that he or
she signs the document. Also known as a donor. In commercial law, a principal is a person who
authorizes an agent to create one or more legal relationships with a third party on the principal's
behalf.
