Love them or hate them, contracts are a fact of life for everyone involved in playing music. Understand why they're necessary, and you're less likely to get ripped off.

LIKE EVERY GOOD STORY, a contract always has two sides to it. Or, as they say in the legal profession, two parties.

First there needs to be someone to offer the contract, then there needs to be someone to accept it, reject it, or haggle about the small print. If either party fails to show, the whole thing's a washout.

In modern music terms, a contract equates to a musician or group handing over the rights to their songs in exchange for a publishing or recording deal. These two kinds of deals have their own different kinds of contract and, together with managerial contracts and (most notorious of all) verbal contracts, constitute the four basic types of legal document an embryonic musician is likely to encounter along the path to fame, fortune, and a spot on 'Wogan'.

Before we discuss each variety of contract in turn, it's worth bearing in mind a few things about how best to approach them. Let's begin with a statement that should not be in any way controversial. All contracts are written in legal gibberish, the sort of language that is designed specifically to baffle the fledgling combo. It makes sense, therefore, to take any contract you're offered straight to somebody who deals with the blessed things day in, day out - a lawyer.

It may seem a pompous extravagance for a band currently playing support on a Monday night at the Kings Head, or a young composer working alone in a spare bedroom of their parents' bungalow, to fork out for a lawyer to cast an eye over a proposed managerial contract. But look at it this way: in the event of you and your colleagues achieving major success, you could live to regret the day you agreed to hand over 75% of your future earnings to the bloke who let you rehearse in his garage.

And before you ask said parents if they know of somebody well-versed in the art of decoding contracts, consider this. It's no good taking a music business contract to the local High Street solicitor who dealt so efficiently with your grandmother's will. Chances are, his knowledge of the industry will be confined to an intense distrust of Boy George, so there's no way he would know what to look out for in a music-related legal document.

Get hold of an experienced solicitor who specialises in music industry agreements - the Musicians' Union publishes a list of them if you're stuck. But finding the right lawyer is only half the problem; the other half is paying for his services. You may find you're struggling to find four quid an hour for the next rehearsal, let alone the £100 a London entertainment solicitor would charge for spending the same amount of time on your case. There are two possible ways around this nasty business. First, it's always worth trying to persuade the party who's offering you the contract to pay all the legal costs involved. Don't laugh. If the manager, publisher or whatever is keen enough to make a deal, they may be more flexible about fees than you may think. Second, and more likely, you could come to an arrangement with your solicitor whereby you pay him after you've received the money specified in the contract. This is by no means uncommon. After all, jam tomorrow is better than no jam at all - even for lawyers.

If, on receiving a draft copy of your contract and spending a couple of hours scrutinising it, you think you understand what all the sub-clauses mean and what all the figures refer to, and you think you can go ahead and negotiate the details yourself... don't. Contracts are never as simple as they appear, and no matter how carefully you think you've studied them, the overwhelming probability is that you'll have missed something vitally important.

It's easily done. A record contract with a major label will be at least 20 pages long, and is not exactly worded in such a way that makes it easy for the average budding popstar (or anyone else for that matter) to understand. A music business solicitor would charge anything between £500 and £1000 to check this sort of contract out, but if you consider that a deal with a major label can last up to five years, it's worth the initial outlay to save money in the future. If threatened by a contract and the prospect of serious cash, one possible course of action is to "panic join" the Musicians' Union, who boast a free contract advisory service. They'll advise you on whether a proposed contract is legally and commercially fair, and give you the use of their recommended solicitors to negotiate it for you.

VERBAL CONTRACTS

THESE ARE THE BANE of every musician's life, for the simple reason that although they're just as legally binding as a written contract, they're not worth the paper they're, er, not written on. Before you ever come face to typescript with a written contract, you're likely to have encountered a dozen verbal ones, most likely concerned with the booking of concerts (in the absence of a Harvey Goldsmith-type figure to do this for you).

At club level, the vast majority of contracts are verbal. The normal scenario is that the club promises to provide the PA and to split a percentage of the money taken on the door with the band. The list of possible headaches is massive: you can find yourself double booked; the PA can be plainly inadequate or fail to turn up at all; there may be an obvious 200 people in the club but the manager may insist that only 50 people are there; or the booker might just turn around and refuse to pay up at all, claiming that not enough people have paid to cover his costs, let alone yours.

As it's impossible to prove your word against his, and worse than impossible to argue the point with a 15-stone "bouncer", prevention is better than cure.

There are certain safety measures that can be taken. If the booker is getting an outside company to provide the PA, call them up to make sure they know about the gig and are in a position to provide you with the technology to give you the sound you want. Even for a musician, there are few things more embarrassing than playing through a PA so quiet you can hear the clink of ice being dropped into a Bacardi and coke at the back of the bar mid-song. Second, politely insist that you have one of your own people sitting adjacent to the door to count how many people are coming in and (more important) how many are actually paying. Third, ring up on the day to ensure the concert is still on, and you've not been double-booked with Vulcan Death Grip, a heavy metal band from Hull. Don't snigger. It happened to me.

MANAGERIAL CONTRACTS

DESPITE THEIR BELIEF in their own business acumen, most musicians could not book a Hertz van to get them to a gig unaided, let alone guide themselves to world domination of U2-type proportions. Furthermore, it's not often you come across a chartered accountant or a small businessman playing in a jazz-funk outfit, hence the necessity to find a third party to circumnavigate the stormy seas of the music business for you. More often than not, this third party will be a manager.

Assuming you find a good one, a manager is unlikely to do anything for you unless he has you signed exclusively to him. This is partly to protect himself (the last thing he needs is to work on a band for three years securing a record deal, only to find himself out in the cold just when the prospect of a serious cash return seems imminent) and partly because he is representing you in any dealings he has on your behalf. It is for these reasons that some kind of management contract has to be agreed on, along with the terms of the manager's employment.

Few musicians are in a strong enough financial position to offer a potential manager a wage, and it's likely that the manager wouldn't accept one anyway. The normal procedure is for a manager to take a percentage of a band's future earnings, in exchange for acting on their behalf. The percentage can vary between 15% and 25%, with 20% being the norm. Peter Grant, manager of Led Zeppelin, worked for 20% and paid his own expenses.

In a managerial contract, there'll be a legal clause stating that he undertakes to exert his "best endeavours on the artists' behalf". This basically means that it's his job to secure a publishing and recording deal (it is palpably ridiculous for a group to turn up in the foyer of CBS Records, insisting they are the best thing since Prince - only they dance better - and are prepared to exchange their services for a six-figure sum). And since it is also in the manager's own interests to get a deal, this is all well and good.

The problems start if it's obvious that the manager is either incapable of doing his job or isn't even trying to - and has lost interest in the band while still under contract. If it transpires that the manager's been sitting at home recording Elton John albums over your demo tapes, it's pretty obvious that a lack of commitment - more than in breach of his contractual obligations - is hampering your progress. Confrontation is the best policy here. If the manager has lost interest, or just isn't having any luck, he's unlikely to insist on seeing the contract out. However, before you sign anything, it's wise to have a clause inserted stating that the contract has to be renewed at periodic intervals (every year is normal) to avoid this contingency.

If a patently superior management expresses an interest in you, it's easiest (and safest) to come to an amicable arrangement whereby the new management "buys out" your existing contract. This shouldn't be too difficult. Nobody in the music industry really wants to go to court owing to the transient nature of the business: by the time a case has come to court, it's likely that all interest in the band concerned will have long since evaporated.

PUBLISHING CONTRACTS

FUNDAMENTALLY, THESE REPRESENT a band's surrender of the rights to their songs. In exchange for this apparently drastic measure, you should get a healthy advance (money paid to you in expectation of future earnings - usually recoupable) and the collection of future royalties from sales and airplay. On the assumption that you don't yet have a recording contract, a music publishing company would be actively involved in promoting you and your work, perhaps allocating money for the recording of demos which may, just possibly, secure you a recording contract. In the case of an individual writer, the publisher may even "work" specific songs by linking a song to an established artist. In a nebulous way, publishers actually undertake to do all this in a contract.

If a publishing company takes a bunch of songs and does nothing with them, a court would normally rule the return of the rights to the previous owner - you. Most contracts have a provision for this, however.

The other side of a publishing contract is that if your songs are successful, the company ensures that all the cash that should be collected is, in fact, collected.

The main areas of earning from publishing are mechanical and performing royalties. Mechanical royalties are collected by the publisher on behalf of the writer of material used on a record, CD, video tape, or whatever. These are paid by the record company at a fixed rate of 6% of the retail price of the item in question. Performing royalties, on the other hand, are paid by broadcasting organisations for airplay or public performances, the most common sources being radio, discos, jukeboxes and so on.

Getting some kind of publishing deal really is essential, since it's impossible for a band to check how many times their latest platter has been played by radio stations (or whoever) all over the world.

But like management contracts, the legal documents associated with publishing deals need not be particularly complicated, and you're unlikely to get completely ripped off if you follow the precautionary steps outlined above.

RECORDING CONTRACTS

SIGNING A CONTRACT with a major record label is, of course, the point at which you should look forward to giving up the day job, cancelling the milk, and packing your bags in anticipation of a world tour.

Although there have been a number of bands who've enjoyed chart success while remaining on independent labels, it's obvious that a major label is ordinarily better placed to release, market and promote records, and dish out advances to bands which may never sell a record in a month of Sundays. And in any case, even small record labels tend to tie you down contractually in one way or another, so there really is no way out of signing a recording contract.

Most recording contracts are standard documents, and will include (somewhere) in their many paragraphs the amount of records you're obliged to record during the duration of the contract. You should receive advance money on signing a contract and a royalty rate will be set. (In the normal course of events, an act receives approximately 10% of the retail price of a record - currently about 10-15p per single and 40-50p per album.)

Negotiations over recording contracts are essentially, though not exclusively, about money - trying to secure a bigger advance or a higher royalty rate. These negotiations really need to be handled by an experienced music business solicitor, as there's nothing quite like legal muscle to shame a record company into agreeing on a slightly more generous rate of pay.

Recording contracts are often the most complicated of all the legal documents a musician has to confront. Not only that, but many musicians - in their enthusiasm to get themselves onto vinyl - simply ignore solicitors' advice, only to be utterly shellshocked when they find that advances are recoupable and their first batch of royalties are swallowed up by recording costs and video bills they'd assumed were paid for by the record company.

The problems don't end there. Getting out of a recording contract is difficult, as it is inevitably weighted on the record company's side - though again, a good lawyer should be able to minimize this disadvantage.

If you feel that, for whatever reason, the record company is not totally behind you and is letting your records "die" through lack of promotion, you'll obviously come to the conclusion that the company is not acting in your best interest and will want to move on. However, the record company could well argue that the recording industry is a speculative business: success cannot be guaranteed and some records are bound to fail, despite their best efforts. So, unlike management and publishing deals, trying to prove a record company is in breach of contract is virtually impossible. Don't even think of taking the matter to court - not if you value your worldly possessions, anyway.

So just beware - some people will rob you at knife point, others will rob you with a ballpoint.