It's not a viable business, the potential for revenue generation is very small without resorting to questionable tactics (see TRUSTe). I was hoping it would function more as a community effort with the human-readable TOS hosted on the relevant site much like Creative Commons. Sadly I think the human-readable TOS is going to have to come from the business itself (or possibly from an established user-rights organization, i.e. CC or EFF).
As for Path's storage of user contacts; while I find the practice sketchy, especially since I just signed up for Path and had no idea this was happening, but not unexpected especially considering facebook's status as a 'role-model' for privacy issues.
Side-note: Khula Project in its current form is deadpooled. I do plan to relaunch sometime in the future with a project more focused on information distribution.