Labor's defiant stance was backed on Friday by Dr Nick Seddon, one of Australia's leading experts on government contracts, who said the government could avoid paying compensation of up to $1.1 billion if it simply passed legislation cancelling the side letter.

Dr Seddon, an adjunct professor at ANU College of Law, said a 2001 High Court case involving the NSW government and a coal company had proved state governments could pass legislation to avoid paying compensation for loss of future profits.

In that case, Durham Holdings was defeated in its attempt to extract maximum compensation from the NSW government after its coal assets were acquired by the state.

"Let's assume the state of Victoria is bound by the side letter, the parliament can then pass legislation saying that is null and void, just as much as it can do that with the contract," Dr Seddon said.

Shadow treasurer Michael O'Brien released on Thursday the side letter that he signed as treasurer in September, guaranteeing the East West Connect consortium that it would get its money regardless of whether a valid contract exists.

Treasurer Tim Pallas maintained on Friday that Labor would not be bound by the side letter, telling radio host Neil Mitchell in an interview on 3AW: "We won't be paying compensation in that magnitude".

"It is ridiculous, it is bizarre that any government would see to poison pill the Victorian economy with a ludicrous set of guarantees," Mr Pallas said.

A spokesman for the Andrews government said Labor had not ruled out introducing legislation to parliament to cancel the East West Link contract and side letter.

Such legislation would need to pass the upper house, where the balance of power is held by five Greens and five independents.

Victorian Greens leader Greg Barber said the party would support any legislation aimed at cancelling the contract.

"This is an unconscionable term to be attached to any contract, and we put the companies on notice last year we would not honour those contracts," Mr Barber said.

Vote 1 Local Jobs MP James Purcell said he would need to see the legislation but would be "on the side of supporting it".

A spokesman for Democratic Labour Party MP Rachel Carling-Jenkins said she would need to see such legislation before forming a view.

The Andrews government promised before the 2014 election that it would not proceed with the East West Link, an $18 billion cross-town toll road, despite the former Napthine government locking in contracts for the project a number of weeks before the state poll.

On Friday morning Prime Minister Tony Abbott said that he would continue to do everything possible to get East West Link built.

But he did not respond to direct questions about whether the Napthine government's controversial "side-letter" was appropriate other than to say both federal and state Coalition governments wanted to get the road built.

"Why would you spend more than a billion not to start a road, but to stop it? That's the prospect right now," Mr Abbott said.

The beleaguered leader also declared that his team won seats in the 2013 federal election because of the commitment to build the multibillion-dollar road.

"We won an election on this issue," he said.