Was the Mosaic Covenant a covenant of "works" or "grace"? In Exodus 20 (but all of Exodus/Leviticus/Numbers/Deuteronomy as well) we read of what many refer to as the Mosaic Covenant - enacted at Sinai, where God gives the Ten Commandments (and later the rest of the moral/ceremonial/civil law) to Israel. 

At first glance, this seems to be a law covenant - after all, it's Ten Commandments, but when we consider the gracious aspects of the sacrifices and the understanding of the "three uses of the law" as under grace, it gets confusing.

So what's the nature and implication of this covenant? Is it a "law", bilateral covenant, like the Covenant of Works in the garden with Adam? Or is it a unilateral, "grace" covenant like the Covenant of Grace to Adam through Christ?

Does it matter?
It's not quite right to emphasize commandments. They are the Ten Words (dabar in Hebrew). They express so much more than mere commands.

For example, this law that God establishes, these "commandments" and statutes and rules that He gives are founded on the fact that He has already saved His people. We see this in the giving of the law on Sinai. 


  “I am Yahweh your God, who brought you out of the land of Egypt, out of the house of slavery. You shall have no other gods before me.” 


And we see the same reason given by God as instruction for the covenant children in Deuteronomy 6


  “When your son asks you in time to come, ‘What is the meaning of the testimonies and the statutes and the rules that Yahweh our God has commanded you?’ then you shall say to your son, ‘We were Pharaoh’s slaves in Egypt. And Yahweh brought us out of Egypt with a mighty hand. And Yahweh showed signs and wonders, great and grievous, against Egypt and against Pharaoh and all his household, before our eyes. And he brought us out from there, that he might bring us in and give us the land that he swore to give to our fathers. And Yahweh commanded us to do all these statutes, to fear Yahweh our God, for our good always, that he might preserve us alive, as we are this day. And it will be righteousness for us, if we are careful to do all this commandment before the LORD our God, as he has commanded us.’


The gospel comes first, then the law. Why? It’s not so God can say, “I saved you and now you owe me” or ”I brought you out of Egypt so I can keep my thumb on you.” It’s God saying, “I’ve set you free from this bondage, this slavery to sin – go and sin no more. Go and live in the freedom of the life I’ve given you.”

So, the law is grace because God is entering into covenant with His chosen people. Keeping the law was never merit - God has already shown His salvation. The "Covenant of Grace" we enjoy now is the same. Christ says, "Moses told you..., but I say..." He doesn't make the law less demanding. If anything, He makes it more so. But the law isn't meant to be a burden. It's a covenant relationship like marriage. "Don't cheat on your wife" isn't a difficult rule to follow for someone who loves his wife. It is absolutely necessary for a right marriage, but it is no burden. It is a security and a comfort to have the boundaries clearly established.