This report describes briefly performance contracts; discusses their shortcomings, pitfalls, and advantages; and gives some insight into the future development of this new concept. Two shortcomings of performance contracting include (1) teaching to the test and (2) board abdication of its responsibility for making final decisions about educational policy. Advantages relate to the potential for better accountability. The author sees promise for the idea of performance contracting, but admits that board members and superintendents will have the power to decide if this new concept will endure. (JF)