The contract idea sounds a little dumb. I'm not an attorney but I was once told by an attorney that I respect a lot that contracts such as the one you described are the easiest to overcome in court.
But with that being said, I've screwed the boss on several different occasions and at a few different jobs. (Yes, I'm kindof bad in that way) And although it's not the Nazi type work atmosphere then as it is now (think fifteen years or more back), only one time was there an issue.
And it was because we both drank too much at a company party and disappeared during the event. The wife got mad. HR was called in. And I was the one fired. Not him. (Gosh. Hadn't thought of THAT ONE in a few years or more)
You're probably going to be alright, though, having an affair.
Historically, bosses and subordinates have been having sex over the desk, under the desk and outside the office for as long as I've been aware of it and most of the time, it's alright. It's the one time that it's an issue that becomes the bitch.
But if you do have to ask, like a guy wrote above, you really have enough sense to keep your cock in your pants. Of course, you ARE in Austin.
They must put something in the water down there. Sexual feelings are always rampant in that part of the state.
Good luck,
Elisabeth