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Mitchell Losey discusses the importance of contracts in the context of starting a photography or video business. He highlights the awkwardness that can arise when pricing and payment are not addressed upfront. Often, new business owners may find themselves in situations where they complete a project without ever discussing compensation, leading to discomfort when it's time to request payment. This can create confusion and strain in client relationships. The tutorial emphasizes the necessity of establishing clear contractual agreements to ensure both parties are on the same page regarding expectations, pricing, and deliverables from the beginning of the working relationship.