The basic structure of framework for the unfolding of the plan of redemption in Scripture is expressed through covenant. Basically, a covenant is an agreement between two or more parties. There are several covenants in biblical history: with Adam and Eve, Noah, Abraham, Moses, and David.
We make covenant promises in virtually every area of life. For example, in marriage, promises are made by two people, and they are sealed with sacred vows in the presence of God. In an employment relationship, both the employer and the employee make certain promises. In our national government, there is an agreement between those who govern and those who are governed.
Three major covenants in Scripture
The covenant of redemption was a covenantal agreement that was made in eternity past among the three persons of the Godhead to redeem the elect. The Father initiated the plan of salvation; and sent His Son into the world to accomplish our redemption. The Son accomplished redemption for us. Redemption is applied to our personal lives by the Holy Spirit, who quickens us, imparting spiritual life and creating faith in our hearts.
The covenant of works refers to the probationary state in which Adam and Eve were created. God gave certain commands along with the promise of eternal life, which was symbolized by the Tree of Life. The primary stipulation was that they were not to eat of the Tree of the Knowledge of Good and Evil. If they remained perfectly obedient, they would (by their perfect works) enter into an eternal state of blessedness. However, if they disobeyed, then they would die, along with their descendants. Adam and Eve failed the test, and a result the world was plunged into ruin.
The covenant of grace provided an opportunity for fallen man to be redeemed. God spared Adam and Eve and redeemed them on the basis of a gracious promise – the promise of redemption through Christ. Christ saved us by becoming our substitute. That is why the NT refers to Him as “the second Adam.” He came into the world and placed Himself under the stipulations of the original covenant of works: “Obey God perfectly or die.” In His life of perfect obedience (His perfect works), and in His death on the cross, Christ fulfilled all the terms of the covenant of works. Justification is through faith in Christ alone because Christ alone fulfilled the covenant of works. The covenant of grace does not nullify the covenant of works; rather, it fulfills it.
[Adapted from Everyone’s a Theologian by R.C. Sproul]