Submitting work that's in a contest

Dear Miss Snark,

Please help me avoid acting clueless. I want to maximize my opportunities without doing something that will make agents snarl. Here's the deal. I will be submitting my recently completed novel in a contest. The contest meets the Snark Test, as it is one YOU posted some months ago with a note that if we felt compelled to enter a contest it was a good one. (Bless you...it was your blog that put me onto the contest.) The winner gets a publishing contract with St. Martin's.

So, the question. I want to query agents while the ms. is under contest consideration. If I wait until I hear that I did not win, I've lost six months. If I do win (Dear Dog in Heaven, get me the smelling salts), then I'd like an agent anyway to advise me on the 'standard contract' they will offer the winner. But will prospective/interested agents be put off that the ms. is in a competition?

Querying agents while the ms is in a contest: bad form or good business? Please advise.

I think it's fine. I wouldn't elevate an eyebrow at that info in a query letter.
In fact you're smart to pursue all avenues.
(You do want to mention it in your cover letter of course.)

And if you win, email me again. I have a lifetime supply of salts here at Snark Central. One must always be prepared for a sighting of Mr. Clooney...or this guy