diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/types/checker/TypeCheckingProcedure.java b/compiler/frontend/src/org/jetbrains/jet/lang/types/checker/TypeCheckingProcedure.java
index c76bbe8d939..ca99f9d0a9e 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/types/checker/TypeCheckingProcedure.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/types/checker/TypeCheckingProcedure.java
@@ -197,7 +197,9 @@ public class TypeCheckingProcedure {
             JetType superIn = getInType(parameter, superArgument);
             JetType superOut = getOutType(parameter, superArgument);
 
-            if (parameter.getVariance() == INVARIANT && subArgument.getProjectionKind() == INVARIANT && superArgument.getProjectionKind() == INVARIANT) {
+            boolean argumentIsErrorType = ErrorUtils.isErrorType(subArgument.getType()) || ErrorUtils.isErrorType(superArgument.getType());
+            if (!argumentIsErrorType && parameter.getVariance() == INVARIANT
+                    && subArgument.getProjectionKind() == INVARIANT && superArgument.getProjectionKind() == INVARIANT) {
                 if (!constraints.assertEqualTypes(subArgument.getType(), superArgument.getType(), this)) return false;
             }
             else {
diff --git a/compiler/testData/diagnostics/tests/inference/reportingImprovements/subtypeForInvariantWithErrorGenerics.kt b/compiler/testData/diagnostics/tests/inference/reportingImprovements/subtypeForInvariantWithErrorGenerics.kt
new file mode 100644
index 00000000000..8d0f5807659
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/reportingImprovements/subtypeForInvariantWithErrorGenerics.kt
@@ -0,0 +1,12 @@
+package a
+
+fun foo<R> (f: ()->R, r: MutableList<R>) = r.add(f())
+fun bar<R> (r: MutableList<R>, f: ()->R) = r.add(f())
+
+fun test() {
+    val <!UNUSED_VARIABLE!>a<!> = <!TYPE_INFERENCE_CONFLICTING_SUBSTITUTIONS!>foo<!>({1}, arrayListOf("")) //no type inference error on 'arrayListOf'
+    val <!UNUSED_VARIABLE!>b<!> = <!TYPE_INFERENCE_CONFLICTING_SUBSTITUTIONS!>bar<!>(arrayListOf(""), {1})
+}
+
+// from standard library
+fun arrayListOf<T>(vararg <!UNUSED_PARAMETER!>values<!>: T) : MutableList<T> {<!NO_RETURN_IN_FUNCTION_WITH_BLOCK_BODY!>}<!>
\ No newline at end of file
diff --git a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
index b43fb17981b..ec43d4b1b34 100644
--- a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
@@ -2315,6 +2315,11 @@ public class JetDiagnosticsTestGenerated extends AbstractDiagnosticsTestWithEage
                     doTest("compiler/testData/diagnostics/tests/inference/reportingImprovements/NoAmbiguityForDifferentFunctionTypes.kt");
                 }
                 
+                @TestMetadata("subtypeForInvariantWithErrorGenerics.kt")
+                public void testSubtypeForInvariantWithErrorGenerics() throws Exception {
+                    doTest("compiler/testData/diagnostics/tests/inference/reportingImprovements/subtypeForInvariantWithErrorGenerics.kt");
+                }
+                
             }
             
             @TestMetadata("compiler/testData/diagnostics/tests/inference/varargs")