Reproducing the issue

1. Create a .terraform-version file with the following contents:

latest:^1.0.invalid

2. Attempt to run terraform validate.

Result

$ terraform validate
/[...]/tfutils/tfenv/lib/tfenv-version-name.sh: line 80: version_requested: unbound variable
$ echo $?
1

Expected Result

A proper error message.

Probable cause

Looking at that file (tfenv-version-name.sh), I found that the "unbound variable" is only contained in the error message. This leads me to conclude that this is a bug. Here, I linked the commit that introduced the error message: 3dc5819#diff-7fcb3e8511bfa185e617cfd1e1b1d11030818551682579fc45fc0d4443ad13efR110

A possible fix could be to replace ${requested} with ${TFENV_VERSION}.