diff --git a/Changelog.md b/Changelog.md
index 69e9bcbc2..cfc218237 100644
--- a/Changelog.md
+++ b/Changelog.md
@@ -12,6 +12,7 @@ Bugfixes:
  * Code generator: Fix ``ABIEncoderV2`` pragma from the current module affecting inherited functions and applied modifiers.
  * Type Checker: Fix internal compiler error caused by storage parameters with nested mappings in libraries.
  * Name Resolver: Fix shadowing/same-name warnings for later declarations.
+ * Contract Level Checker: Add missing check against inheriting functions with ABIEncoderV2 return types in ABIEncoderV1 contracts.
 
 
 ### 0.7.3 (2020-10-07)
diff --git a/docs/layout-of-source-files.rst b/docs/layout-of-source-files.rst
index ea14c8330..08f3bb4fe 100644
--- a/docs/layout-of-source-files.rst
+++ b/docs/layout-of-source-files.rst
@@ -119,6 +119,13 @@ decoding types only supported by the new encoder. The compiler can detect this
 and will issue an error. Simply enabling ``ABIEncoderV2`` for your contract is
 enough to make the error go away.
 
+.. note::
+  This pragma applies to all the code defined in the file where it is activated,
+  regardless of where that code ends up eventually. This means that a contract
+  without the ``ABIEncoderV2`` pragma can still contain code that uses the new encoder
+  by inheriting it from another contract. This is allowed if the new types are only
+  used internally and not in external function signatures.
+
 .. _smt_checker:
 
 SMTChecker
diff --git a/libsolidity/analysis/ContractLevelChecker.cpp b/libsolidity/analysis/ContractLevelChecker.cpp
index 47f9af62a..97f3fdc98 100644
--- a/libsolidity/analysis/ContractLevelChecker.cpp
+++ b/libsolidity/analysis/ContractLevelChecker.cpp
@@ -474,7 +474,7 @@ void ContractLevelChecker::checkBaseABICompatibility(ContractDefinition const& _
 
 		auto const& currentLoc = func.second->declaration().location();
 
-		for (TypePointer const& paramType: func.second->parameterTypes() + func.second->parameterTypes())
+		for (TypePointer const& paramType: func.second->parameterTypes() + func.second->returnParameterTypes())
 			if (!TypeChecker::typeSupportedByOldABIEncoder(*paramType, false))
 			{
 				errors.append("Type only supported by ABIEncoderV2", currentLoc);
diff --git a/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_event.sol b/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_event.sol
new file mode 100644
index 000000000..a1241fcee
--- /dev/null
+++ b/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_event.sol
@@ -0,0 +1,15 @@
+==== Source: A ====
+pragma experimental ABIEncoderV2;
+
+struct Item {
+    uint x;
+}
+
+contract C {
+    event Ev(Item);
+}
+==== Source: B ====
+import "A";
+
+contract D is C {}
+// ----
diff --git a/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_function_accepting_struct.sol b/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_function_accepting_struct.sol
new file mode 100644
index 000000000..23535eafc
--- /dev/null
+++ b/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_function_accepting_struct.sol
@@ -0,0 +1,16 @@
+==== Source: A ====
+pragma experimental ABIEncoderV2;
+
+contract C {
+    struct Item {
+        uint x;
+    }
+
+    function get(Item memory) external view {}
+}
+==== Source: B ====
+import "A";
+
+contract D is C {}
+// ----
+// TypeError 6594: (B:13-31): Contract "D" does not use ABIEncoderV2 but wants to inherit from a contract which uses types that require it. Use "pragma experimental ABIEncoderV2;" for the inheriting contract as well to enable the feature.
diff --git a/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_function_returning_struct.sol b/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_function_returning_struct.sol
new file mode 100644
index 000000000..ba568504e
--- /dev/null
+++ b/test/libsolidity/syntaxTests/abiEncoder/v1_inheritance_from_contract_defining_v2_function_returning_struct.sol
@@ -0,0 +1,16 @@
+==== Source: A ====
+pragma experimental ABIEncoderV2;
+
+contract C {
+    struct Item {
+        uint x;
+    }
+
+    function get() external view returns(Item memory) {}
+}
+==== Source: B ====
+import "A";
+
+contract D is C {}
+// ----
+// TypeError 6594: (B:13-31): Contract "D" does not use ABIEncoderV2 but wants to inherit from a contract which uses types that require it. Use "pragma experimental ABIEncoderV2;" for the inheriting contract as well to enable the feature.