A discussion of performance contracting, defined as an agreement between a group offering instruction and a school needing the services, is presented. Four major hazards to direct measurement of specific learning are considered: poor statement of objectives; selection of the wrong tests; misinterpretation of test scores; and depersonalization of contemporary life. These and other problems such as human and testing error, valid criterion testing, and the question of when to test, are discussed in full. The relationship of these hazards of performance measurement to performance contracting, and to regular school programs, is presented. (AG)