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Principal and principle are often confused as they have the same pronunciation, but have different meanings. In non-legal usage, principle (a doctrine, standard, rule, or law, etc.) is always a noun: A principle of management is to treat your employees as you want them to treat your customers.

On the other hand, principal (primary, chief, most important) is both a noun and an adjective, though usually an adjective in non-legal usage: A faulty gasket was the principal reason for the engine’s failure. In general usage principal refers to a person who plays an important role or holds a high position: Last week, there was a meeting among the principals in the deal.

In legal and financial English, however, principal is often a noun (from principal person). In the law of agency, the principal is the one on whose behalf the agent acts: She attended the meeting as the agent of a principal who wished to remain anonymous. In banking the principal (sum) is money invested or borrowed on which interest is paid: The borrower was only able to make the minimum payment, which covered the interest but did not reduce the principal.