Also known as: principal sums · principal
Written by attorneys · grounded in primary & secondary sources — see below
The base amount of money owed or invested under a financial obligation, excluding interest or additional charges.
Pablo Perez lent Phuong Pham $50,000 to start a business. When Phuong failed to repay, Pablo's agent drove recklessly to collect the debt and caused a fatal crash. The court treated the killing as involuntary manslaughter because the agent's criminal negligence during collection of the principal sum caused the death.
Prime Logistics owed the United States a large judgment for contract breaches. The President granted a pardon that released the company from paying the principal sum of the judgment but left accrued interest intact.
Peak Performance authorized its agent to negotiate repayment terms with a supplier. The agent agreed to accept the principal sum of an overdue invoice in installments. The supplier could enforce the agreement against Peak Performance because the agent acted within the scope of manifested consent.
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Coral Cruises paid a large principal sum upfront for a five-year island charter. After a hurricane closed the island, the court discharged Coral Cruises from further payments because the principal purpose of the contract had been substantially frustrated.
Phoenix Technologies was incorporated in Delaware but maintained its headquarters and directed all operations from California. A plaintiff seeking the principal sum of a contract claim could not establish general jurisdiction in Texas merely because the company conducted substantial sales there.
Platinum Partners, a corporation incorporated in New York, maintained its principal place of business in Illinois. When suing for the principal sum due on a contract, the plaintiff properly alleged diversity by citing both the state of incorporation and the principal place of business under the statute.
The principal sum is the base or original amount of money borrowed or invested. Interest is the additional charge calculated on that base amount. The drafting guide distinguishes the two by defining the principal sum as the main investment figure before any interest accrues.
Supporting sources
Yes, when an unforeseen event substantially frustrates the party's principal purpose and the nonoccurrence of that event was a basic assumption of the contract, the remaining duty to pay the principal sum is discharged unless the contract allocates the risk otherwise.
The amount in controversy for diversity jurisdiction includes the principal sum claimed. Courts require clear pleading of this amount to confirm that the jurisdictional threshold is met and to distinguish it from interest or costs that are excluded from the calculation.
…act, passed 27 July 1789, established an executive department denominated the Department of Foreign Affairs and appointed a principal officer to perform duties enjoined or intrusted to him by the President relative to correspondences, commissions, instructions, negotiations with public ministers, memorials and other…