This is a bug (thanks for the report).
A valid work-around might be to reconfigure the legend for this plot:
\documentclass{standalone}
\usepackage{tikz,pgfplots}
\begin{document}
\begin{tikzpicture}
\begin{axis}[view={0}{90},
legend image post style={
sharp plot,
draw=\pgfkeysvalueof{/pgfplots/contour/draw color},
},
legend entries={foo,bar}] % 'legend entries' causes compilation error
\addplot3[contour gnuplot={draw color=red,labels=false}] {x*y};
\addplot3[contour gnuplot={draw color=blue,labels=false}] {x^2 + y^2};
\end{axis}
\end{tikzpicture}
\end{document}

The legend image post style
means to interprete the coordinates of the current legend style as a normal "sharp plot". The draw
statement retrieves the current value of the contour color setting (which matches your use-case here).
\documentclass{...}
and ending with\end{document}
.