120 percent. A rule of thumb for line spacing (in jargon ‘leading’ – pronounced l’edding) is the font size multiplied by 120 percent, slightly greater than the capital height. For font sizes greater than 11 point or more, line spacing may increase a bit, whereas 8 or 9 point fonts can do with a little bit less line spacing. These rules of thumb suggest that single line spacing is too small and one and a half too wide.
An appropriate default setting would be 11 points (Arial) letter size and 14 points line spacing. Of course this is largely a matter of preference.

Alignment has a relatively large impact on the readability of a text. Four types of alignment can be identified: left alignment, right alignment, justified and centred. Western society (i.e. those who are used to reading and writing from left to right) will intuitively prefer left aligned texts above (fully) justified ones.

Justification. In justified texts, both the left and the right hand side are straight. Justification radiates a sense of order, discipline and tradition. It is characteristic of newspaper layout which separates columns visually from each other. The potential dangers are evident on a line ending with a long word, ugly gaps may occur between the words, inevitably compelling word hyphenation.

Left alignment. Left-aligned (‘left-flushed’) texts are characterised by a ragged right paragraph structure. They are much more natural than justified texts. Word spaces are consistent with the font design. Only in the twentieth century did this printing style become customary (before that, it was rarely used, probably because typesetters considered justification as a proof of their printing skills).
In contracts, the sections and subsections should either left-align or be justified. In European style contracts, the article headings are left aligned (or, with no particular additional effect, justified). In U.S. style contracts, the article headings are often centred.

Centred & right-aligned. Normally, centred texts are only used for cover pages, for headers and footers, and for headings of schedules or annexes. Right alignment is only desirable in very short eye catchers: confidentiality markers or contract date and version identifiers. Whilst the reader will likely catch the two or three right-aligned marking words, he or she will probably completely miss messages consisting of more than just a few words. See the marked text blocks in the example.

Typography & margins. Rather than the line length, which is typographically a more appropriate reference point, use the margin settings of word processors. When establishing a house style, you should consider that readability decreases when lines are either too short or too long. Readability reduces if the reader must move from line to line too often and finding the beginning of a line is ‘laborious’ because, supposedly, the eye cannot hold the beginning in sight whilst reading on to the end.
Furthermore the readability would improve by using a broader bottom and right margin.
The line of a contract clause should contain on average 13 to 16 words, or 60 to 75 characters (but not more than 90). This can be achieved by margins of 2.5 or 3 cm on A4 paper size. Consider a broader left margin in view of the fact that letters and agreements are often kept in a binder (tying the left side closed, as they are often also single side printed).