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Construction contracts are agreements between two parties, typically involving the exchange of money for services, such as building a house. Even the most basic contracts can be verbal and legally binding, but proving such agreements can be challenging in case of disputes. Therefore, it's essential to have everything in writing to avoid complications. The speaker shares a personal experience from the first six months of their business, where the lack of a written contract led to a loss of about $3,000, highlighting the importance of documenting agreements to prevent financial setbacks.