This paper examines the subject of "contract teaching", particularly as it relates to the field of instruction for physical education majors. Essentially, contracting for grades includes, "...an agreement between a teacher and a student at the beginning of a course as to the grade the student expects to receive and the amount and quality of work he is expected to produce to earn this grade." Students are asked their option for the grade, "A", "B", or "C". Once the contract with the instructor is signed, the student is permitted to change the contract only to a higher grade. A course planned in this way consists of the following elements: (1) a written statment of objectives to be achieved by students; (2) content to be used to reach objectives for which credit is awarded at the junior and senior levels; (3) expected levels of achievement; and (4) procedures for evaluation. The rationale for contract teaching rests upon the philosophy that contracted responsibilities are not built one upon the other so that the more work that is accomplished, the higher the grade; rather, the quality of work is considered to be the criteria for academic achievement. An example is given of using this method of teaching in a physical education course. In the course, "Psychosocial Implications of Physical Education," alternative choices were introduced within the grade options. For an "A" contract, in addition to other responsibilities, the student could elect an observational study of an athletic event or a written autobiography describing a personal critical psychological event during sports participation. A bibliography is attached to this paper. (JD)