Internet mail tries sends to local host

When sending Internet e-mail Outlook/Exchange also tries to send to name.domain.local.com. Result is Internet address sent and message undeliverable error, or course, on local host. Receipent only exits in Contacts list, no listing in Global and is not a user. Problem seems to be confined to 2 machines and only to specific contacts. Have tried deletion and recreation of contact with no success. Any ideas much appreciated. Thanks Brent