What if a Boss demoted an employee, is this a violation of the employee's contract?

such thing usually is declared in the contract , otherwise it will not be considered as a violation of the contract. 

e.g .. some of the companies has internal policy for evaluating the employees, a result of this process might be demoting or discharging. 

so at the end it depends on the internal policy of the company and such companies usually stated this clearly in the contract.

 e.g in my contract it is mentioned somthing like "it prohibits the manager from discharging or demoting except there is evidence of gross mismanagement , a gross waste of funds, or a violation of law, rule, or regulation related to the contract".  something like that

but definitely it is a violation and prohibited when it comes as reprisal. i believe this is prohibited even by the law not only the contract, even if it is undertaken at the request of an executives,

It all depends on the reason, if for misconduct, downsizing etc and all protocols have been followed - N0.

If it is because he wants to promote a friend or relative - Yes

The key here is the wording on the employment contract and to make sure the protocols have been followed, i.e verbal and written warnings, often demotion is offered rather than dismissal.