diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/calls/inference/ConstraintSystemImpl.java b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/calls/inference/ConstraintSystemImpl.java
index 1815b8b37bd..a63372b5d1f 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/calls/inference/ConstraintSystemImpl.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/calls/inference/ConstraintSystemImpl.java
@@ -169,8 +169,7 @@ public class ConstraintSystemImpl implements ConstraintSystem {
             return;
         }
 
-        if (constrainingType == null || (ErrorUtils.containsErrorType(constrainingType)
-                && !TypeUtils.equalsOrContainsAsArgument(constrainingType, DONT_CARE, CANT_INFER, PLACEHOLDER_FUNCTION_TYPE))) {
+        if (constrainingType == null || (ErrorUtils.isErrorType(constrainingType) && constrainingType != PLACEHOLDER_FUNCTION_TYPE)) {
             hasErrorInConstrainingTypes = true;
             return;
         }
diff --git a/compiler/testData/diagnostics/tests/inference/reportingImprovements/ErrorTypeAsGenericParameter.kt b/compiler/testData/diagnostics/tests/inference/reportingImprovements/ErrorTypeAsGenericParameter.kt
new file mode 100644
index 00000000000..f64d5e70815
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/reportingImprovements/ErrorTypeAsGenericParameter.kt
@@ -0,0 +1,9 @@
+package a
+
+fun <T, R, S> foo(block: (T)-> R, <!UNUSED_PARAMETER!>second<!>: (T)-> S) = block
+
+fun main(args: Array<String>) {
+    val fff = { (x: Int) -> <!UNRESOLVED_REFERENCE!>aaa<!> }
+    foo(<!DEBUG_INFO_ELEMENT_WITH_ERROR_TYPE!>fff<!>, { x -> x + 1 })
+}
+
diff --git a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
index 91b00c922d1..d3220625c18 100644
--- a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
@@ -2270,6 +2270,11 @@ public class JetDiagnosticsTestGenerated extends AbstractDiagnosticsTestWithEage
                     doTest("compiler/testData/diagnostics/tests/inference/reportingImprovements/cannotInferParameterTypeWithInference.kt");
                 }
                 
+                @TestMetadata("ErrorTypeAsGenericParameter.kt")
+                public void testErrorTypeAsGenericParameter() throws Exception {
+                    doTest("compiler/testData/diagnostics/tests/inference/reportingImprovements/ErrorTypeAsGenericParameter.kt");
+                }
+                
                 @TestMetadata("NoAmbiguityForDifferentFunctionTypes.kt")
                 public void testNoAmbiguityForDifferentFunctionTypes() throws Exception {
                     doTest("compiler/testData/diagnostics/tests/inference/reportingImprovements/NoAmbiguityForDifferentFunctionTypes.kt");