diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/parsing/JetParsing.java b/compiler/frontend/src/org/jetbrains/jet/lang/parsing/JetParsing.java
index 6ad6630245c..7dcf6c310b8 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/parsing/JetParsing.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/parsing/JetParsing.java
@@ -980,8 +980,7 @@ public class JetParsing extends AbstractJetParsing {
             expect(IDENTIFIER, "Expecting parameter name", TokenSet.create(RPAR, COLON, LBRACE, EQ));
 
             if (at(COLON)) {
-                advance();
-
+                advance();  // COLON
                 parseTypeRef();
             }
             setterParameter.done(VALUE_PARAMETER);
@@ -1730,20 +1729,23 @@ public class JetParsing extends AbstractJetParsing {
     private boolean parseFunctionParameterRest() {
         expect(IDENTIFIER, "Parameter name expected", PARAMETER_NAME_RECOVERY_SET);
 
+        boolean noErrors = true;
+
         if (at(COLON)) {
             advance(); // COLON
             parseTypeRef();
         }
         else {
-            error("Parameters must have type annotation");
-            return false;
+            errorWithRecovery("Parameters must have type annotation", PARAMETER_NAME_RECOVERY_SET);
+            noErrors = false;
         }
 
         if (at(EQ)) {
             advance(); // EQ
             myExpressionParsing.parseExpression();
         }
-        return true;
+
+        return noErrors;
     }
 
     /*
diff --git a/compiler/testData/psi/recovery/ValueParameterNoTypeRecovery.jet b/compiler/testData/psi/recovery/ValueParameterNoTypeRecovery.jet
new file mode 100644
index 00000000000..bfe2ad9318e
--- /dev/null
+++ b/compiler/testData/psi/recovery/ValueParameterNoTypeRecovery.jet
@@ -0,0 +1 @@
+class Test(val a = 12, val b : Int = 13)
\ No newline at end of file
diff --git a/compiler/testData/psi/recovery/ValueParameterNoTypeRecovery.txt b/compiler/testData/psi/recovery/ValueParameterNoTypeRecovery.txt
new file mode 100644
index 00000000000..ebd52b9b83f
--- /dev/null
+++ b/compiler/testData/psi/recovery/ValueParameterNoTypeRecovery.txt
@@ -0,0 +1,41 @@
+JetFile: ValueParameterNoTypeRecovery.jet
+  NAMESPACE_HEADER
+    <empty list>
+  CLASS
+    PsiElement(class)('class')
+    PsiWhiteSpace(' ')
+    PsiElement(IDENTIFIER)('Test')
+    TYPE_PARAMETER_LIST
+      <empty list>
+    VALUE_PARAMETER_LIST
+      PsiElement(LPAR)('(')
+      VALUE_PARAMETER
+        PsiElement(val)('val')
+        PsiWhiteSpace(' ')
+        PsiElement(IDENTIFIER)('a')
+        PsiErrorElement:Parameters must have type annotation
+          <empty list>
+        PsiWhiteSpace(' ')
+        PsiElement(EQ)('=')
+        PsiWhiteSpace(' ')
+        INTEGER_CONSTANT
+          PsiElement(INTEGER_LITERAL)('12')
+      PsiElement(COMMA)(',')
+      PsiWhiteSpace(' ')
+      VALUE_PARAMETER
+        PsiElement(val)('val')
+        PsiWhiteSpace(' ')
+        PsiElement(IDENTIFIER)('b')
+        PsiWhiteSpace(' ')
+        PsiElement(COLON)(':')
+        PsiWhiteSpace(' ')
+        TYPE_REFERENCE
+          USER_TYPE
+            REFERENCE_EXPRESSION
+              PsiElement(IDENTIFIER)('Int')
+        PsiWhiteSpace(' ')
+        PsiElement(EQ)('=')
+        PsiWhiteSpace(' ')
+        INTEGER_CONSTANT
+          PsiElement(INTEGER_LITERAL)('13')
+      PsiElement(RPAR)(')')
\ No newline at end of file