diff --git a/src/go/types/NOTES b/src/go/types/NOTES
index 566aee75c1..3f2758c91a 100644
--- a/src/go/types/NOTES
+++ b/src/go/types/NOTES
@@ -12,6 +12,7 @@ TODO
 - use []*TypeParam for tparams in subst? (unclear)
 
 OPEN ISSUES
+- a contract that is used earlier than its declaration may not be set up yet
 - 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 enumerating type arguments currently leads to an error (e.g. func f(type T C(T)) (x T) ... )
diff --git a/src/go/types/contracts.go b/src/go/types/contracts.go
index db99113318..63458a8f1b 100644
--- a/src/go/types/contracts.go
+++ b/src/go/types/contracts.go
@@ -126,10 +126,42 @@ func (check *Checker) contractDecl(obj *Contract, cdecl *ast.ContractSpec) {
 			if econtr == nil {
 				check.invalidAST(c.Types[0].Pos(), "invalid embedded contract %s", econtr)
 			}
-			etyp := check.typ(c.Types[0])
-			_ = etyp
-			// TODO(gri) complete this
-			check.errorf(c.Types[0].Pos(), "%s: contract embedding not yet implemented", c.Types[0])
+			// Handle contract lookup 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 {
+					// TODO(gri) must set up contract if not yet done!
+					// eobj is a valid contract
+					// TODO(gri) look for contract cycles!
+					// contract arguments must match the embedded contract's parameters
+					if len(econtr.Args) != len(eobj.TParams) {
+						check.errorf(c.Types[0].Pos(), "%d type parameters but contract expects %d", len(econtr.Args), len(eobj.TParams))
+						continue
+					}
+					// contract arguments must be type parameters
+					// For now, they must be from the enclosing contract.
+					// TODO(gri) can we allow any type parameter?
+					targs := make([]Type, len(econtr.Args))
+					for i, arg := range econtr.Args {
+						targ := check.typ(arg)
+						if parg, _ := targ.(*TypeParam); parg != nil {
+							// TODO(gri) check that targ is a parameter from the enclosing contract
+							targs[i] = targ
+						} else {
+							check.errorf(arg.Pos(), "%s is not a type parameter", arg)
+						}
+					}
+					// TODO(gri) - implement the steps below
+					// - for each eobj type parameter, determine its (interface) bound
+					// - substitute that type parameter with the actual type argument in that interface
+					// - add the interface as am embedded interface to the bound matching the actual type argument
+					// - tests! (incl. overlapping methods, etc.)
+					check.errorf(c.Types[0].Pos(), "%s: contract embedding not yet implemented", c.Types[0])
+					continue
+				}
+			}
+			check.errorf(c.Types[0].Pos(), "%s is not a contract", c.Types[0])
 		}
 	}
 
diff --git a/src/go/types/decl.go b/src/go/types/decl.go
index 4477b27ff1..54a71834af 100644
--- a/src/go/types/decl.go
+++ b/src/go/types/decl.go
@@ -636,6 +636,7 @@ func (check *Checker) collectTypeParams(list *ast.FieldList) (tparams []*TypeNam
 					goto next
 				}
 				// obj is a valid contract
+				// TODO(gri) must set up contract if not yet done!
 				// Use contract's matching type parameter bound and
 				// instantiate it with the actual type parameters
 				// (== targs) present.
diff --git a/src/go/types/testdata/tmp.go2 b/src/go/types/testdata/tmp.go2
index cbb358b144..5deb0e4605 100644
--- a/src/go/types/testdata/tmp.go2
+++ b/src/go/types/testdata/tmp.go2
@@ -3,3 +3,13 @@
 // license that can be found in the LICENSE file.
 
 package p
+
+contract C1(a, b, c) {
+        a a()
+        b b()
+        c c()
+}
+
+contract C2(a, b) {
+        C1 /* ERROR contract embedding */ (a, b, a)
+}