The Covenant of Grace
The Reformation Theology sites posts a great excerpt on the Covenant of Grace from Wayne Grudem’s Systematic Theology. Here’s how it begins . . .
1. Essential Elements. When man failed to obtain the blessing offered in the covenant of works, it was necessary for God to establish another means, one by which man could be saved. The rest of Scripture after the story of the fall in Genesis 3 is the story of God working out in history the amazing plan of redemption whereby sinful people could come into fellowship with himself. Once again, God clearly defines the provisions of a covenant that would specify the relationship between himself and those whom he would redeem. In these specifications we find some variation in detail throughout the Old and New Testaments, but the essential elements of a covenant are all there, and the nature of those essential elements remains the same throughout the Old Testament and the New Testament.
The parties to this covenant of grace are God and the people whom he will redeem. But in this case Christ fulfills a special role as “mediator” (Heb. 8:6; 9:15; 12:24) in which he fulfills the conditions of the covenant for us and thereby reconciles us to God. (There was no mediator between God and man in the covenant of works.) The condition (or requirement) of participation in the covenant is faith in the work of Christ the redeemer (Rom. 1:17; 5:1; et al.). This requirement of faith in the redemptive work of the Messiah was also the condition of obtaining the blessings of the covenant in the Old Testament, as Paul clearly demonstrates through the examples of Abraham and David (Rom. 4:1–15). They, like other Old Testament believers, were saved by looking forward to the work of the Messiah who was to come and putting faith in him.
You can read the entire excerpt here.