[albahk]

A good template is Automattic's Privacy policy which they have made available for anyone to copy and use.

http://automattic.com/privacy/

[cheald]

This was going to my reply, as well. The provision of a legally-drafted contract is quite a service to the community. You'll want to modify it to fit your product, but it's a great place to start and hits all the high points.

[vchien]

Great..