diff --git a/src/go/types/NOTES b/src/go/types/NOTES
index 3be20066a1..83241ad5a3 100644
--- a/src/go/types/NOTES
+++ b/src/go/types/NOTES
@@ -5,8 +5,8 @@ TODO
 - interface embedding doesn't take care of literal type constraints yet
   (need an allTypes list, like we have an allMethods list?)
 
-
 OPEN ISSUES
+- contracts slip through in places where only types are permitted
 
 
 DESIGN DECISIONS
diff --git a/src/go/types/decl.go b/src/go/types/decl.go
index 3f1b9ab695..349e8ef0d8 100644
--- a/src/go/types/decl.go
+++ b/src/go/types/decl.go
@@ -615,6 +615,7 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 	index = 0
 	for _, f := range list.List {
 		var bound Type
+		var isContract bool
 		if f.Type != nil {
 			typ := check.typ(f.Type)
 			if typ != Typ[Invalid] {
@@ -628,6 +629,7 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 						break // cannot use this contract
 					}
 					bound = typ
+					isContract = true
 				default:
 					check.errorf(f.Type.Pos(), "%s is not an interface or contract", typ)
 				}
@@ -636,10 +638,16 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 
 		// set the type parameter's bound
 		// (do this even if bound == nil to make sure index is correctly increasing)
-		for _, name := range f.Names {
+		for i, name := range f.Names {
 			tname := tparams[index]
-			assert(name.Name == tname.name) // keep - this assertion caught index errors
-			tname.typ.(*TypeParam).bound = bound
+			assert(name.Name == tname.name) // catch index errors
+			// TODO(gri) enable the then branch to force interfaces for all
+			//           bounds and unpack the interface in the else branch
+			if false && isContract {
+				tname.typ.(*TypeParam).bound = bound.Underlying().(*Contract).ifaceAt(i)
+			} else {
+				tname.typ.(*TypeParam).bound = bound
+			}
 			index++
 		}
 	}
diff --git a/src/go/types/examples/contracts.go2 b/src/go/types/examples/contracts.go2
index b3b0c6ea7a..408c901e65 100644
--- a/src/go/types/examples/contracts.go2
+++ b/src/go/types/examples/contracts.go2
@@ -51,7 +51,7 @@ func New (type Node, Edge G) (nodes []Node) *Graph(Node, Edge) { panic("unimplem
 
 type AltGraph (type Node NodeFace(Edge), Edge EdgeFace(Node)) struct { }
 
-// func AltNew (type Node NodeFace(Edge), Edge EdgeFace(Node)) (nodes []Node) *AltGraph(Node, Edge) { panic("unimplemented") }
+func AltNew (type Node NodeFace(Edge), Edge EdgeFace(Node)) (nodes []Node) *AltGraph(Node, Edge) { panic("unimplemented") }
 
 type NodeFace(type Edge) interface {
 	Edges() []Edge
diff --git a/src/go/types/subst.go b/src/go/types/subst.go
index e183d7a79a..05e33a256c 100644
--- a/src/go/types/subst.go
+++ b/src/go/types/subst.go
@@ -50,6 +50,8 @@ func (check *Checker) instantiate(pos token.Pos, typ Type, targs []Type, poslist
 		return Typ[Invalid]
 	}
 
+	// TODO(gri) should we check for len(tparams) == 0?
+
 	// check bounds
 	for i, tname := range tparams {
 		targ := targs[i]
@@ -62,7 +64,7 @@ func (check *Checker) instantiate(pos token.Pos, typ Type, targs []Type, poslist
 		//           (keeping it may make sense because it's a common scenario and it may
 		//           be more efficient to check)
 		if tpar.bound == nil {
-			continue // no bound (optimization)
+			continue // no type bound (optimization)
 		}
 
 		// best position for error reporting
@@ -74,6 +76,16 @@ func (check *Checker) instantiate(pos token.Pos, typ Type, targs []Type, poslist
 		// determine type parameter bound
 		iface := tpar.Interface()
 
+		//check.dump(">>> %s: iface before: %s", pos, iface)
+		bound := check.subst(pos, tpar.bound, tparams, targs).Underlying()
+		switch b := bound.(type) {
+		case *Interface:
+			iface = b
+		case *Contract:
+			iface = b.ifaceAt(i)
+		}
+		//check.dump(">>> %s: iface after : %s", pos, iface)
+
 		// targ must implement iface (methods)
 		if m, _ := check.missingMethod(targ, iface, true); m != nil {
 			check.softErrorf(pos, "%s does not satisfy %s (missing method %s)", targ, tpar.bound, m)
@@ -124,7 +136,7 @@ func includesType(typ Type, iface *Interface) bool {
 // subst returns the type typ with its type parameters tparams replaced by
 // the corresponding type arguments targs, recursively.
 func (check *Checker) subst(pos token.Pos, typ Type, tpars []*TypeName, targs []Type) Type {
-	assert(len(tpars) == len(targs)) // bounds may have only some type parameters
+	assert(len(tpars) == len(targs))
 	if len(tpars) == 0 {
 		return typ
 	}