A great example of a readable and effective contract I've found is the terms of use to the Patently-O blog:

http://www.patentlyo.com/patent/2006/01/patentlyo_blog_.html

It does a nice job of using the formal legal language but also introducing each section with a human readable explanation.

The contract terms in the article are good in that they are human readable, but they lack legal precision. Consider the copyright assignment: "you own the graphics and visual elements" but "we own the XHTML markup, CSS and other code." There are plenty of ambiguities (if someone copies the layout, whose copyright is infringed? are the licenses exclusive? are they revocable?). Two judges could read this contract to mean substantially different things.