Part Two

The mutuality principle is both the only, and the best way of avoiding the prohibition on the passing of the burden of a positive freehold covenant.

Critically assess this statement with reference to academic opinion and case law.

The mutuality principle is a form of legal standard that was created by case law. This principle is based on the fact that an organisation cannot receive money from itself. It is also based around the fact that if a certain amount of people are able to contribute towards a common fund that have been created by them and are controlled solely by them , then any additional funds for the common purpose will not be held as income but saved for whichever later reason they see fit to spend it. The case Commissioner of Income-tax v. I.T.I. Employees Death & Superannuation Relief established that mutuality principle also offers a tax shelter as money that is being saved cannot be treated as a taxable income.

Every covenant has two sides the Benefit and the Burden. The benefit is when a promisee’s has the right to enforce his wishes or a promise and the burden is the promissor’s obligation to fulfil the duty. The case Halsall v Brizell were the claimaint wanted to enforce a covenant upon the defendent who were reluctant to pay the full amount to the claimant when it was due. The case established that if the succesor wanted to take the benefit of a covenant, he also has a responsibility of taking the burden of making sure he pays for it.

The Pure Benefit and Burden principle is a simplified application of the benefit and burden principle. Megarry V-C. Defined the pure principle as; an obligation imposed by a deed or other arrangement that also grants a benefit may bind a person taking the benefit. Megarry believed that the pure principle can only apply to cases where a burden cannot act as a condition for the benefit.

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[ 1 ]. Commissioner of Income-tax v. I.T.I. Employees Death & Superannuation Relief und [1998] 101 TAXMAN 315 (KAR.)
[ 2 ]. Halsall v Brizell [1957] Ch 169
[ 3 ]. http://journals.cambridge.org/action/displayFulltext?type=1&fid=1544&jid=CLJ&volumeId=57&issueId=03&aid=1543