diff --git a/src/go/types/NOTES b/src/go/types/NOTES
index 18a2c876fa..5b2f77b718 100644
--- a/src/go/types/NOTES
+++ b/src/go/types/NOTES
@@ -4,6 +4,7 @@ so we have a better track record. I only switched to this file in Nov 2019, henc
 ----------------------------------------------------------------------------------------------------
 TODO
 
+- implement explicit contract instantiation (currently reports an error)
 - type assertions on/against parameterized types
 - use Underlying() to return a type parameter's bound? investigate!
 - if type parameters are repeated in recursive instantiation, they must be the same order (not yet checked)
@@ -16,7 +17,6 @@ KNOWN ISSUES
 
 - instantiating a parameterized function type w/o value or result parameters may have unexpected side-effects
   (we don't make a copy of the signature in some cases) - investigate
-- using a contract and providing type arguments currently leads to an error (e.g. func f(type T C(T)) (x T) ... )
 - leaving away unused receiver type parameters leads to an error; e.g.: "type S(type T) struct{}; func (S) _()"
 - using _ for an unused receiver type parameter leads to an error and crash; e.g.: "type T(type P) int; func (_ T(_)) m()"
 
@@ -28,7 +28,9 @@ OPEN QUESTIONS
 - confirm that it's ok to use inference in missingMethod to compare parameterized methods
 - now that we allow parenthesized embedded interfaces, should we allow parenthesized embedded fields?
   (probably yes, for symmetry and consistency).
-
+- What does it mean to explicitly instantiate a contract with a non-type parameter argument?
+  (e.g., contract C(T) { T int }; func _(type T C(int))(...) ... seems invalid. What are the rules?)
+  
 ----------------------------------------------------------------------------------------------------
 DESIGN/IMPLEMENTATION
 
diff --git a/src/go/types/contracts.go b/src/go/types/contracts.go
index 4ffc9ac771..5b50cc352f 100644
--- a/src/go/types/contracts.go
+++ b/src/go/types/contracts.go
@@ -120,59 +120,25 @@ func (check *Checker) contractDecl(obj *Contract, cdecl *ast.ContractSpec) {
 
 			// Handle contract lookup here so we don't need to set up a special contract mode
 			// for operands just to carry its information through in form of some contract Type.
-			// TODO(gri) this code is also in collectTypeParams (decl.go) - factor out!
-			if ident, ok := unparen(econtr.Fun).(*ast.Ident); ok {
-				if eobj, _ := check.lookup(ident.Name).(*Contract); eobj != nil {
-					// set up contract if not yet done
-					if eobj.typ == nil {
-						check.objDecl(eobj, nil)
-						if eobj.typ == Typ[Invalid] {
-							continue // don't use contract
-						}
-					}
-					// eobj is a valid contract
-					// contract arguments must match the embedded contract's parameters
-					n := len(econtr.Args)
-					if n != len(eobj.TParams) {
-						check.errorf(c.Types[0].Pos(), "%d type parameters but contract expects %d", n, len(eobj.TParams))
-						continue
-					}
+			if eobj, targs, valid := check.unpackContractExpr(econtr); eobj != nil {
+				// we have a (possibly invalid) contract expression
+				if !valid {
+					continue
+				}
 
-					// contract arguments must be type parameters from the enclosing contract
-					var targs []Type
-					for _, arg := range econtr.Args {
-						targ := check.typ(arg)
-						if parg, _ := targ.(*TypeParam); parg != nil {
-							// Contract declarations are only permitted at the package level,
-							// thus the only type parameters visible inside a contract are
-							// type parameters from the enclosing contract.
-							// The assertion below cannot fail unless we change the premise
-							// and permit contract declarations inside parameterized functions.
-							assert(tparams[parg.index] == parg.obj)
-							targs = append(targs, targ)
-						} else if targ != Typ[Invalid] {
-							check.errorf(arg.Pos(), "%s is not a type parameter", arg)
-						}
-					}
-					if len(targs) < n {
-						continue // some arguments were incorrect
-					}
+				// instantiate each (embedded) contract bound with contract arguments
+				ebounds := make([]*Named, len(eobj.Bounds))
+				for i, ebound := range eobj.Bounds {
+					ebounds[i] = check.instantiate(econtr.Args[i].Pos(), ebound, targs, nil).(*Named)
+				}
 
-					// instantiate each (embedded) contract bound with contract arguments
-					assert(n == len(eobj.Bounds))
-					ebounds := make([]*Named, n)
-					for i, ebound := range eobj.Bounds {
-						ebounds[i] = check.instantiate(econtr.Args[i].Pos(), ebound, targs, nil).(*Named)
-					}
-
-					// add the instantiated bounds as embedded interfaces to the respective
-					// embedding (outer) contract bound
-					for i, ebound := range ebounds {
-						index := targs[i].(*TypeParam).index
-						iface := bounds[index].underlying.(*Interface)
-						iface.embeddeds = append(iface.embeddeds, ebound)
-						check.posMap[iface] = append(check.posMap[iface], econtr.Pos()) // satisfy completeInterface requirements
-					}
+				// add the instantiated bounds as embedded interfaces to the respective
+				// embedding (outer) contract bound
+				for i, ebound := range ebounds {
+					index := targs[i].(*TypeParam).index
+					iface := bounds[index].underlying.(*Interface)
+					iface.embeddeds = append(iface.embeddeds, ebound)
+					check.posMap[iface] = append(check.posMap[iface], econtr.Pos()) // satisfy completeInterface requirements
 				}
 				continue // success
 			}
diff --git a/src/go/types/decl.go b/src/go/types/decl.go
index f8e2bf2d7b..235779a527 100644
--- a/src/go/types/decl.go
+++ b/src/go/types/decl.go
@@ -637,20 +637,21 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 		// If f.Type denotes a contract, handle everything here so we don't
 		// need to set up a special contract mode for operands just to carry
 		// its information through in form of some contract Type.
-		if ident, ok := unparen(f.Type).(*ast.Ident); ok {
-			if obj, _ := check.lookup(ident.Name).(*Contract); obj != nil {
-				// set up contract if not yet done
-				if obj.typ == nil {
-					check.objDecl(obj, nil)
-					if obj.typ == Typ[Invalid] {
-						goto next // don't use contract
-					}
-				}
+		if obj, targs, valid := check.unpackContractExpr(f.Type); obj != nil {
+			// we have a (possibly invalid) contract expression
+			if !valid {
+				goto next
+			}
+			if targs != nil {
+				// obj denotes a valid contract that is instantiated with targs
+				check.errorf(f.Type.Pos(), "contract instantiation not yet implemented")
+			} else {
+				// obj denotes a valid uninstantiated contract =>
+				// use the declared type parameters as "arguments"
 				if len(f.Names) != len(obj.TParams) {
 					check.errorf(f.Type.Pos(), "%d type parameters but contract expects %d", len(f.Names), len(obj.TParams))
 					goto next
 				}
-				// obj is a valid contract
 				// Use contract's matching type parameter bound and
 				// instantiate it with the actual type parameters
 				// (== targs) present.
@@ -662,8 +663,8 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 					bound := obj.Bounds[i]
 					setBoundAt(index+i, check.instantiate(name.Pos(), bound, targs, nil))
 				}
-				goto next
 			}
+			goto next
 		}
 
 		// otherwise, bound must be an interface
@@ -682,11 +683,18 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 	return
 }
 
-func (check *Checker) unpackContractExpr(x ast.Expr) (obj *Contract, targs []Type) {
+// unpackContractExpr returns the contract obj of a contract name x = C or
+// the contract obj and type arguments targs of an instantiated contract
+// expression x = C(T1, T2, ...), and whether the expression is valid.
+// If x does not refer to a contract, the result obj is nil (and valid is
+// true). If x is not an instantiated contract expression, the result targs
+// is nil. If x is a contract expression but contains type errors, valid is
+// false.
+func (check *Checker) unpackContractExpr(x ast.Expr) (obj *Contract, targs []Type, valid bool) {
 	// permit any parenthesized expression
 	x = unparen(x)
 
-	// a call expression might be an instantiated contract => unpack arguments
+	// a call expression might be an instantiated contract => unpack
 	var call *ast.CallExpr
 	if call, _ = x.(*ast.CallExpr); call != nil {
 		x = call.Fun
@@ -699,38 +707,34 @@ func (check *Checker) unpackContractExpr(x ast.Expr) (obj *Contract, targs []Typ
 			if obj.typ == nil {
 				check.objDecl(obj, nil)
 				if obj.typ == Typ[Invalid] {
-					goto Error // we have a contract but it's broken
+					check.use(call.Args...)
+					return // we have a contract but it's broken
 				}
 			}
 			if call != nil {
 				// collect type arguments
 				if len(call.Args) != len(obj.TParams) {
 					check.errorf(call.Pos(), "%d type parameters but contract expects %d", len(call.Args), len(obj.TParams))
-					goto Error
+					check.use(call.Args...)
+					return
 				}
 				for _, arg := range call.Args {
-					if targ := check.typ(arg); targ != Typ[Invalid] {
+					// for now, contract type arguments must be type parameters
+					targ := check.typ(arg)
+					if _, ok := targ.(*TypeParam); ok {
 						targs = append(targs, targ)
+					} else if targ != Typ[Invalid] {
+						check.errorf(arg.Pos(), "%s is not a type parameter", arg)
 					}
 				}
 				if len(targs) != len(call.Args) {
-					// some arguments were invalid
-					obj.typ = Typ[Invalid]
-					return
+					return // some arguments are invalid
 				}
 			}
 		}
 	}
 
-	return
-
-Error:
-	if call != nil {
-		check.use(call.Args...)
-	}
-	if obj != nil {
-		obj.typ = Typ[Invalid]
-	}
+	valid = true
 	return
 }
 
diff --git a/src/go/types/testdata/tmp.go2 b/src/go/types/testdata/tmp.go2
index 97242bb0d7..a7779ea8d3 100644
--- a/src/go/types/testdata/tmp.go2
+++ b/src/go/types/testdata/tmp.go2
@@ -31,4 +31,4 @@ contract C(T) {
         T op(T) T
 }
 
-func f(type T ((C)))(x, y T) T //{ return x.op(y) }
+func f(type T C /* ERROR not yet implemented */ (T))(x, y T) T //{ return x.op(y) }