The mediation period in contract negotiations between the D. C. school board and the Washington Teachers Union has been extended for a second time, with both sides predicting that the contract can be settled within the coming week even though marathon sessions over the weekend failed to produce an agreement.

Federal mediator John Wagner asked for and received the extension from the city's Public Employee Relations Board. The mediation period, which has already been extended once, was to end last Sunday. The parties now have until Friday to reach agreement, after which the matter is scheduled to go to binding arbitration.

In sessions last weekend, "both parties were making such encouraging progress," said Stephanie Cabaniss, a school system negotiator. Cabaniss and teacher representatives met from 2 p.m. Friday to 8 a.m. on Saturday, and then from 2 p.m. to 5:30 p.m. on Sunday. Talks are to resume on Wednesday.

Teachers Union President William H. Simons said the main points of dispute are proposals that teachers be required to receive a better-than-satisfactory performance rating in order to obtain certain pay raises, and also that they work an extra hour each day; and that the union be allowed to have an agency shop, in which all employes who receive contract benefits would have to pay union dues.

School system officials said they felt their position has been strengthened by the fact that negotiations with the bargaining agents for 500 top-level administrators and 1,400 clerks, secretaries and educational aides have already been concluded. Those employes, including principals and assistant principals, have agreed to meet a better-than-satisfactory performance requirement once during their employment with the schools, in order to advance on the salary scale.

"A precedent has been set" for stiffer job performance requirements, Cabaniss said. "This certainly exerts some pressure on other unions in the system."

The school system wants teachers to receive a better-than-satisfactory rating from their principals when they have reached their fifth year in the system and are going from a salary of $16,800 to $17,506, and in their ninth year, when they are moving from $19,618 to $20,324.

But Simons, who represents 4,200 teachers, said he feels under no pressure to agree to the terms that the other employes accepted, and he remains opposed to the strengthened performance requirements.

"This is going to create more problems than it is going to resolve," Simons said. "How are you going to determine what is a better-than-satisfactory performance when you're dealing with people? . . . Will you base it on student performance indicated by test scores? Sometimes you can't tell how much influence a teacher has had on a student until four or five years later."

The other groups have negotiated three-year contracts providing an immediate 5 percent pay increase retroactive to last Nov. 1, plus a 3.5 percent bonus. Their contracts also provide for a 7 percent raise in the 1983 fiscal year beginning next October and 6 to 8 percent the next year, with the exact amount to be determined by the cost of living index.

The teachers have asked for an across-the-board 6 percent increase this year, 7 percent in fiscal 1983 and 8 percent the following year.

The school system has proposed that the teachers work a 7 1/2-hour work day, instead of 6 1/2 hours, and that 9 to 11 work days be added to the school calendar. Simons said the union will not work additional hours without extra compensation.