In my .bash_profile I have the following lines
export GRAILS_HOME=/usr/share/java/grails; export PATH=$PATH:$GRAILS_HOME/bin;
$GRAILS_HOME is a
This was due to my JAVA_HOME variable not being set up correctly. As soon as I added export JAVA_HOME=/Library/Java/Home Grails started working.
export JAVA_HOME=/Library/Java/Home