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Understanding the different types of construction contracts is essential as they outline payment, liability, and various job aspects. Contracts protect both the builder and owner by clarifying expectations from the start, thus preventing issues like cost overruns. Numerous types of building contracts exist, each customized to the project's needs. It’s important to understand these options for effective project management. The tutorial explains the distinctions between contract types and advises when to use each. The discussion begins with lump sum contracts, which involve a fixed price for all work completed on the project.