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In this video tutorial, Edgar from Tax Dome explains how to create contract templates. Users should navigate to the settings page, then the templates tab, and finally the contracts sub-tab. Here, they can either create a new contract template or copy existing ones from a template library. Existing templates can be edited by clicking their names. To create a new template, users click the "create template" button and provide a name for it. There are two formatting options available: "what you see is what you get" (WYSIWYG), offering basic text formatting tools, and HTML mode, which allows for more advanced formatting by pasting HTML code into the text box for greater customization.