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A construction contract is established between a client looking to build or remodel a home and a general contractor. The video explains the four main types of construction contracts: 1. **Fixed Price**: A pre-determined price is set for services covering materials and labor, with clients paying a specific total.2. **Cost Plus**: Clients pay for the contractor's actual expenses for materials and labor, plus a fee or percentage for profit.3. **Time and Material**: Clients pay contractors for materials and labor at a negotiated rate, with contractors typically charging more than their costs for profit.4. **Unit Pricing**: Contracts based on a per-square-foot basis for pricing.The video aims to simplify the contract creation process and clarify these types.