You may recieve this exception when hosting .NET 3.0 WCF services in partial-trust, this will not be the case in .NET 3.5.
The other day I was working on hosting a WCF web service in SharePoint. I ran in to an error hosting the service in IIS "The contract name 'CONTRACT' could not be found in the list of contract implemented by the service 'Service'". The contract is implemented, and and there are no spaces in the web.config contract name. It turns out this is the exception you receive when hosting WCF in partial trust.
If you are hosting a .NET 3.0 WCF service in IIS and recieving this error, you may want to ensure you are running in full trust, because WCF does not support partial-trust today, but... it will in .NET 3.5.
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