So any legal issues with the contract will be brought to your employer, not you personally. Your employer may then wish to seek damages against you for some of their costs because you did not report it tooto them sooner, but such a case is certain to fail. For one, even if they win, you probably have no money to pay them and can file for bankruptcy instantly. If they lose, they will have substantial court costs to pay. What probability do they have of winning? Slim to none. You can offer both ignorance AND/OR duress as credible defences. https://en.wikipedia.org/wiki/Duress_in_English_law
Also, the only thing more impressive than a PhD is turning one down because the system failed you. Then go get a job at the grant-awarding body.
EDIT: Due to "popular demand", and the fact that this post sits at a healthy -4, I am adding this edit. In the above text I mention that I am not a lawyer. It goes without saying therefore that what i present isn't to be considered legal council. It is just an internet comment. However, it does contain actual legal information, which other commenters deemed incorrect, despite they themselves being frighteningly unclear on, if this went to trial, who would actually be suing whom. They also request that I make it quite clear when I state "/Duress_in_English_Law", that I only refer to English law, because this was perhaps unclear. In my defence, Common Law, which was developed in England and spread to the rest of the English-speaking world is actually rather... Common. Unsurprisingly, that is both why it is called Common Law, and why I referenced it in the first place. https://en.wikipedia.org/wiki/List_of_national_legal_systems#Common_law
One of the nice things about Common Law is that many things, like the definition of basic legal terms such as "fraud", are very very similar wherever Common Law is applied. This is what makes having a conversation about law over the internet possible, without having to constantly qualify everything.
So I think it's fair to say that everything in this post is probably relevant to the OP, and isn't just some wishy-washy "do it because it's the right thing" or "if you don't do it you'll burn in hell" vote bait. I dont care for votes. What matters is that this guy DOES go to a lawyer, and DOES bring this matter to the attention of the grant-funding body. The chances of that happening is so very very much higher if he appreciates that he is not personally liable, as all the above nonesense brolawyer posts above suggest.