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In the video tutorial, Matu explains how to create a nanny contract using legal templates from legaltemplates.net. To start, click on the link provided to access business forms. Instead of scrolling through various forms, use the search engine to find the contract you need. The contract outlines the service being provided, who is providing it, and the buyer or customer. Include a description of the service and what is required from the nanny. Keep the contract simple and clear.