diff --git a/lib/ansible/modules/cloud/misc/terraform.py b/lib/ansible/modules/cloud/misc/terraform.py
index b74b468d8e6..1d54be2f4bf 100644
--- a/lib/ansible/modules/cloud/misc/terraform.py
+++ b/lib/ansible/modules/cloud/misc/terraform.py
@@ -359,6 +359,7 @@ def main():
                                                                      module.params.get('targets'), state, plan_file)
         command.append(plan_file)
 
+    out, err = '', ''
     if needs_application and not module.check_mode and not state == 'planned':
         rc, out, err = module.run_command(command, cwd=project_path)
         # checks out to decide if changes were made during execution
diff --git a/test/units/modules/cloud/misc/test_terraform.py b/test/units/modules/cloud/misc/test_terraform.py
new file mode 100644
index 00000000000..77c1a5375e1
--- /dev/null
+++ b/test/units/modules/cloud/misc/test_terraform.py
@@ -0,0 +1,20 @@
+# Copyright: (c) 2019, Ansible Project
+# GNU General Public License v3.0+ (see COPYING or https://www.gnu.org/licenses/gpl-3.0.txt)
+
+import json
+
+import pytest
+
+from ansible.modules.cloud.misc import terraform
+from units.modules.utils import set_module_args
+
+
+def test_terraform_without_argument(capfd):
+    set_module_args({})
+    with pytest.raises(SystemExit) as results:
+        terraform.main()
+
+    out, err = capfd.readouterr()
+    assert not err
+    assert json.loads(out)['failed']
+    assert 'project_path' in json.loads(out)['msg']