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The tutorial explains the difference between an invoice and a legal contract for contractors in California. Many contractors mistakenly believe an invoice serves as a contract. An invoice typically contains the contractor's and client's information and details the work done along with payment received, acting primarily as proof of payment without offering protection. In contrast, a home improvement contract is necessary for work on existing residential properties. This type of contract is suitable for various trades, including landscaping, electrical work, plumbing, and roofing. The tutorial emphasizes the importance of understanding these distinctions to ensure proper legal protection.