diff --git a/collects/mzlib/private/contract.ss b/collects/mzlib/private/contract.ss
index 55a56ea384..39dcb1b9a1 100644
--- a/collects/mzlib/private/contract.ss
+++ b/collects/mzlib/private/contract.ss
@@ -84,28 +84,36 @@ improve method arity mismatch contract violation error messages?
     (make-set!-transformer
      (let ([saved-id-table (make-hash-table)])
        (λ (stx)
-          (let ([key (syntax-local-lift-context)])
-            (unless (hash-table-get saved-id-table key #f)
-              (with-syntax ([contract-id contract-id]
-                            [id id]
-                            [name (datum->syntax-object #f (syntax-object->datum id) id)]
-                            [pos-module-source pos-module-source])
-                (hash-table-put!
-                 saved-id-table
-                 key
-                 (syntax-local-introduce
-                  (syntax-local-lift-expression
-                   #'(-contract contract-id
-                                id
-                                pos-module-source
-                                (module-source-as-symbol #'name)
-                                (quote-syntax name)))))))
-            (with-syntax ([saved-id (syntax-local-introduce (hash-table-get saved-id-table key))])
-              (syntax-case stx (set!)
-                [(name arg ...) (syntax/loc stx (saved-id arg ...))]
-                [name
-                 (identifier? (syntax name))
-                 (syntax saved-id)])))))))
+          (if (eq? 'expression (syntax-local-context))
+              ;; In an expression context:
+              (let ([key (syntax-local-lift-context)])
+                ;; Already lifted in this lifting context?
+                (unless (hash-table-get saved-id-table key #f)
+                  ;; No: lift the contract creation:
+                  (with-syntax ([contract-id contract-id]
+                                [id id]
+                                [name (datum->syntax-object #f (syntax-object->datum id) id)]
+                                [pos-module-source pos-module-source])
+                    (hash-table-put!
+                     saved-id-table
+                     key
+                     (syntax-local-introduce
+                      (syntax-local-lift-expression
+                       #'(-contract contract-id
+                                    id
+                                    pos-module-source
+                                    (module-source-as-symbol #'name)
+                                    (quote-syntax name)))))))
+                ;; Expand to a use of the lifted expression:
+                (with-syntax ([saved-id (syntax-local-introduce (hash-table-get saved-id-table key))])
+                  (syntax-case stx (set!)
+                    [(name arg ...) (syntax/loc stx (saved-id arg ...))]
+                    [name
+                     (identifier? (syntax name))
+                     (syntax saved-id)])))
+              ;; In case of partial expansion for module-level and internal-defn contexts,
+              ;; delay expansion until it's a good time to lift expressions:
+              (quasisyntax/loc stx (#%expression #,stx)))))))
   
   ;; (define/contract id contract expr)
   ;; defines `id' with `contract'; initially binding