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Construction contracts are agreements between two parties that typically involve an exchange of money for services, such as building a house. While verbal agreements are legally binding, they are difficult to prove in disputes. Therefore, it is essential to document all agreements in writing. The speaker shares a personal experience from their first six months in business, where the lack of a written contract resulted in a loss of about three thousand dollars. This taught them a valuable lesson about the importance of having everything documented to avoid financial setbacks in future transactions.