Of all the covenants that the Lord has made with His people, perhaps none is more misunderstood than the Mosaic covenant, which we more commonly refer to as the old covenant. Fundamentally, the covenant with Israel that was mediated by Moses is a gracious covenant. It is part of the unfolding of the covenant of grace, and does not introduce a new principle of salvation in opposition to the Abrahamic covenant of promise.
Along with such luminaries as Charles Hodge, we could say that in some sense the Mosaic covenant is "a renewed proclamation of the original covenant of works"; in that it sets forth a theoretical (for sinners) way of salvation via perfect obedience to its commands (see Lev. 18:5; Gal. 3:10-14). But the Lord never meant for the Israelites to think that they could fulfill the covenant and keep His law with the perfection He demands for justification. The very existence of the sacrificial system, for example, presupposes that they would not. In fact, the sacrifices of the Mosaic covenant are a testimony to its being part of the one covenant of grace, added to show people their transgression and to cultivate the hope of a Messiah who would offer the final sacrifice for sin. But the Mosaic covenant is not a republication of the covenant of works in the sense that it is opposed to the covenant with Abraham; in fact, it is part of the covenant of grace, a gracious gift of God to reveal His demands, point people finally to Christ, and provide a blueprint that outlines holy living for those who have been justified by faith alone.
In the Mosaic covenant, God's promises to Abraham begin to reach a more glorious fulfillment. The twelve tribes made up of the patriarch's descendants are constituted as a nation as the Lord starts to make the number of Abraham's progeny as numerous as the stars (see Gen. 12:1-3; 15:1-6). God comes to dwell among His people in the tabernacle (Ex. 40:34-38), and the Israelites are called to be a holy nation that testifies to the Lord's grace and encourages the Gentiles to come to Him for blessing (19:1-6; Deut. 4:1-8; Micah 4:1-5).
The gracious character of the Mosaic covenant is most evident when we consider the context in which the Lord gave it. As we see in today's passage, there was nothing in Israel that motivated God to enter into covenant with the nation. In fact, it was His decision alone to do so and keep the oath He swore to the patriarchs (Deut. 7:6-8). Furthermore, salvation comes first. God saves the Israelites from Egypt, and only then does He reveal His law.
By revealing His law to Israel after redeeming the nation from Egypt, our Creator establishes the basic principle of sanctification. Strictly speaking, we do not make ourselves holy. First, God saves us from sin and sets us apart as His holy people. Then, we receive and obey His law, expressing our gratitude for His gracious redemption. The Mosaic law is God's gift of grace, given not as a means to save ourselves but to show us how to live in thankfulness for His salvation.