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Error contact id does not exist when editing child entity

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We have a custom entity with a lookup field to contact. The custom entity contains a notes field.

For only one record (so far), we can not edit the notes field because onSave we get an error 

Exception Message: Contact With Id = (the guid) Does Not Exist

ApiExceptionSourceKey: Plugin/Microsoft.Crm.ObjectModel.CustomBusinessEntityService
ApiStepKey: c3cbf56a-0b91-e911-a81b-000d3aba5e95
ApiDepthKey: 1
ApiActivityIdKey: 3cd55625-6a1c-4c0c-a68a-e87a1a457eee
ApiPluginSolutionNameKey: System
ApiStepSolutionNameKey: System
ApiExceptionCategory: ClientError
ApiExceptionMessageName: ObjectDoesNotExist
ApiExceptionHttpStatusCode: 404


Activity Id: ac0af527-1f62-4e66-a3bb-13844a3788ab

The contact with that ID does not, indeed exist. (confirmed by XRM Toolbox)
If we select another contact via the lookup from the custom entity, we can then edit the notes and save - but ONLY ONCE! - When we try again the same error is thrown - it keeps reverting back to the guid of the missing contact record.

Additional error info: 

UciError: contact With Id = xxxxxxxxxxxxxxxxx Does Not Exist at i ( at new f ( at Function.fromLegacyErrorStatus ( at y ( at

Thanks in advance for any assistance.

- Seamus