Labour condemned the decision, claiming Mr Hancock would be acting as Mr Grayling’s “human shield” on Monday.
But Downing Street said “the supply of medicines” was a key part of the no-deal cargo that the ferries would bring to Britain.
Mr Grayling personally signed the pre-Christmas contracts, including one with “start-up firm” Seaborne Freight, which it then emerged had no ships.
Eurotunnel, which operates the Channel Tunnel, launched a legal challenge, protesting that the £108m contracts had been doled out in a “distortionary and anti-competitive” way.
The £33m payout triggered fresh calls for Mr Grayling’s resignation, which came after he was forced to scrap the £13.8m contract with Seaborne last month after its main backer withdrew support.
The transport secretary has not been seen since the agreement reached with Eurotunnel and was reported to have cancelled an event on Friday.
Theresa May’s spokesperson defended sending Mr Hancock to answer Commons questions on the basis that the contracts were “a cross-departmental issue”.
“This was about securing the capacity to make sure we are prepared for no deal and, obviously, the supply of medicines is a very important part of that,” he said.
Asked about Mr Grayling’s whereabouts, the spokesperson added: “I’m guessing he is working in his department.”
Andy McDonald, Labour's transport spokesperson, said: “Chris Grayling told us that Brexit would allow parliament to take back control, yet he is running scared of questions over his latest costly blunder.
“The government are no longer prepared to defend the indefensible so the secretary of state has been sent into hiding. The transport secretary remaining in post is an insult to taxpayers and an international embarrassment.”
Labour has accused Mr Grayling of a “trail of destruction” through various government departments, including the part privatisation of the probation service, which cost the taxpayer an extra £427m.
The government defended the Eurotunnel payout on the basis that it was “protecting the vital freight capacity that the government has purchased”, from other ferry firms.
“This freight capacity will help ensure the continued supply in a no-deal scenario of crucial medicines, medical supplies and veterinary medicines,” it said, in a statement on Friday.
Mr Grayling’s statement added: “I am pleased that this agreement will ensure the Channel Tunnel is ready for a post-Brexit world.”
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