if cat /var/log/messages | grep fail = " "  
then 
echo "Good"
else
echo "Bad"
fi

You need backquotes to capture output
Then double quotes to make it a single argument for test
And you need test
And it should be a truely empty string

if test "`cat /var/log/messages | grep fail`" = ""  
then 
echo "Good"
else
echo "Bad"
fi

if test -z "`cat /var/log/messages | grep fail`" 
...

if grep fail /var/log/messages
then
     echo failed
else
     echo no problems
fi

thank you all for the prompt reply ! All of the info provided is very useful to me thanks !

#!/bin/sh

LOG_FILE=log.txt
grep -l fail /var/log/messages* > $LOG_FILE
if [$? -eq 0]
then 
      echo "Bad"
      echo "Files that contains failures are"
      cat $LOG_FILE
else
      echo "Good"
fi
exit

awk '/[Ff]ail/{filename[FILENAME];nextfile}END{for (i in filename) print i }' /var/log/messages*