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Construction contracts are agreements between two parties, typically involving an exchange of money for services, such as building a house. The simplest type of contract can be a verbal agreement, which is legally binding, though difficult to prove in case of disputes. Therefore, it’s crucial to always get everything in writing to avoid complications. The speaker shares a personal lesson learned early in their business, where failing to have a written contract cost them $3,000. This experience underscores the importance of written agreements to prevent potential financial losses.