That's most definitely some dodgy stuff in those T&C. While many contests essentially ask for an irrevocable license that lets them use your picture however you want (still semi-dodgy in my mind, since it means they can sell it and make money off of it or change it however they want), this is much worse because essentially what they are saying is that you would be infringing *their* copyright if you ever used the picture you submitted.
Just as a side note that's reasonably relevant, pay attention to the difference between giving a contest a license to use your photo and giving them the copyright to it. By giving them a license you can usually still use it (unless they throw in another clause elsewhere that says something different, but this tends to be that you can't say, have it on another site or enter it in another contest... still look at the whole thing). By giving them copyright, the photo is no longer yours and you can't ever use it again without their permission. Very, very bad.
As yet another aside, contests should ask for some sort of license to use your photo, but these licenses usually only ask for a license to display your work, sometimes in other formats then you're submitting it for (e.g. web/print/gallery/etc). If they didn't ask for that license, they could be violating your copyright because they have nothing to say that you otherwise gave them permission
For a good example of the sort of clause, just look at Flickr's T&C since you're giving them a license to display your work online (if they didn't have this, they couldn't show your pictures).