Was the Mosaic Covenant a covenant of "works" or "grace"?

It's a unilateral covenant of grace.

Belief in the covenant leads to fulfilment. What does belief involve?

God promised Canaan to Israel. He commands Israel to face the Canaanites. Does it mean that God will give Canaan to Israel only if she fights Canaanites?

No. She has to face the enemy. But God does the fighting.

Similarly, Israel must face the Law, but it is God who fulfils it.

Law does not obviate grace. It is a means for grace to manifest. Just as the Canaanites were a means to show how God WINS Canaan for Israel.

The Mosaic covenant is not a republication of the covenant of works. First, "republication" assumes a previous covenant of works, in the garden, and that is a matter of serious dispute. If there were no covenant of works in the garden, then the Mosaic Covenant could not be a republication.

But for the sake of argument, I'll assume that the relationship between God and Adam should be characterized as a covenant of works. Adam failed, and God responded with a broad covenant of grace that manifested itself in various "administrations" running from Noah, Abraham, Moses, David and the New Covenant. In each of these covenants (which were the unfolding of the one covenant of grace) God sovereignly and graciously imposes the covenant and calls forth a response of faith and obedience. Think of marriage: husband and wife are bound together by covenant and that covenantal relationship is the basis for blessings and obligations.

Turning to the Mosaic covenant in particular, note first that Israel clearly is already redeemed. They have been delivered from slavery in Egypt. (The better place to see the framework for the duties and obligations of the Mosaic covenant, by the way, is Exodus 19:1-6.) Israel is already "saved" by God's grace—carried on eagles wings and brought to God. He then calls them to "obey my voice and keep my covenant..."

But someone will say "Look, God says "If you obey ... then you will be my treasured possession... (Ex. 19:5)" That looks like a conditional covenant based upon works!"

Three points in response.

1. Remember they are already God's people, already loved, already delivered from Egypt. So obedience is not the basis for Israel's status before God. Later, it will become evident that obedience is required for the health of her relationship with God, just as faithfulness, etc. is for the blessings and health of a marriage. But it is not the basis of the relationship.

2. "Treasured possession" means, essentially, "God's personal private property for His own use." (cf. Bruce Waltke, An Old Testament Theology, p. 407). The point is not, "if you obey, then I will love/treasure you" but rather, "if you obey, you will be my special instrument as a kingdom of priests in the world."

3. That brings me to the final point. The history of the debate about the Mosaic covenant has taken place withing a framework in which the burning issue is personal salvation, or, in other words, the means and method by which God will accomplish blessing his chosen people. It is quite self-centred. The whole discussion fails to appreciate the missional dimension of God's calling. Exodus 19:1-5 (as well as the Abrahamic and Davidic covenants) have a goal beyond Abraham and Israel and David. God will bless Abraham, and through him bless the nations. David will have an heir who will bring justice and righteousness to the nations. Israel is called out to be a "kingdom of priests, for the whole earth is Mine", says God. Israel was not chosen instead of the world, but for the world (well, firstly and ultimately for the glory of God). The giving of the Torah and the conditionality of the Mosaic covenant is not focused on being saved, but on being "fit for purpose" as God's missionary people in the world (cf. Christopher Wright, The Mission of God, among other works). The conditionality is not focused on being saved, but on being "fit for purpose" as God's missionary people in the world.

In the final days of His ministry Jesus sums things up for the disciples in John 13-17. Among other things, Jesus emphasizes that they were chosen to go and bear fruit. Further they were sent just as Jesus had been sent. This is the language of mission. And then, in light of that they are told to love, sacrifice, and "not be of the world". That is, in a sense, a summary of what the Mosaic laws were doing (supposed to do) in the Old Testament: separate out the people of God as a distinct and holy people so they could be a light to the nations.

This argument is made much more clearly, fully and with proper nuance, by CJH Wright, and I refer the reader to him.

It is certainly not unilateral. In a unilateral covenant, only one party must assent to the terms of the covenant in order for it to be ratified. For example, the covenant enacted in Gen. 15:12 is unilateral because Avraham was in a deep sleep when God alone passed between the split animal pieces (Gen. 15:17), signifying ratification of the covenant. Since God, who cannot lie (Tit. 1:2), swore by Himself (Heb. 6:13-18), He showed "the heirs of promise the immutability of His counsel." Had Avraham been required to assent, then it would have been possible for the covenant to be later nullified on account of Avraham's [in]actions or misconduct. However, since God swore by Himself, the covenant is sure, and there is no possibility for it be abolished.

On the other hand, the Mosaic covenant (i.e., "Old Covenant") --- that which was mediated by Moshe, is a bilateral covenant. God delivered the terms of the covenant to Moshe. As the mediator, Moshe then promulgated the terms to the nation of Israel. The nation of Israel had the choice of rejection or acceptance of the terms. They chose to accept the terms, signifying ratifcation:

Cursed be he who does not confirm all the words of this Law, to do them. And all the people shall say, "Amen." (Deut. 27:26)

Since the Israelites did not keep the terms of the Old Covenant, a covenant based on works (Rom. 10:5; Gal. 3:12), then God promised a New Covenant whereby their sins would no longer be remebered (Jer. 31:34 cp. Heb. 8:12), The Old Covenant was not faultless (Heb. 8:7); however, the fault was not with God's terms, but with the people (Heb. 8:8).

It is also noteworthy that nowhere in the Mosaic Covenant are there provisions for eternal life in the world to come, but rather, prolonged life on the earth, in the land which God gave to the Israelites (e.g., Deut. 4:40).

The Mosaic Law is best understood from its moral code as a renewed covenant of works first enjoined over Adam and the whole human race. However, it was so renewed with an inlaid ceremony, predicting the promise of a better covenant, according to grace in a future Messiah, that it did not contravene the previous covent of grace given to Abraham, according to the promised seed that would bring blessing to many nations.

The concept that the Law of Moses was a ‘gracious’ act of God to gives laws to the ‘people of promise’ and that in so doing it was a covenant of grace, and not of works is a more recent theory and one picked up by Biblical Theology. This makes Biblical theology different from traditional covenant theology, which clearly believes the Law of Moses was a renewed covenant of works not based upon the promise to Abraham, but based upon the birth covenant of Adam. Some of the names that propose the Law of Moses was a renewal of the 'covenant of works' include Martin Luther, John Calvin, John Owen, Jonathan Edwards, Charles Hodge, etc. This post about Covenant Theology versus Biblical Theology shows the difference as directly quoted from several authors.

There is more controversy on this question then may be first imagined, and I believe it is possibly the single most important question effecting the average person’s view of the Bible. The danger to me in thinking that the Mosaic Laws were ‘gracious’ rather than ‘condemning’ with the goal of ‘increasing sin’ (Rom 5:20), is that then one may think we should have the same ‘fear’ and ‘guilt’ under the New Covenant that was natural under the old, and that a legalistic approach to God is all the more difficult to resist. (Heb 12:18) As this problem is so great and the stakes involved so high I have made the largest post ever on the ‘differences’ between the two covenants here. I apologize for the length of this post about the differences between law and grace, but there is no question dearer to my heart than this.

However to provide a simple straightforward answer I think the scripture is clear. The Law was not based on the promise! This is the sticking point. If we argue that since the promise was made to Abraham and since the Laws given to Abraham’s descendants, therefore the Law was a gracious gift based upon the promise, we argue directly against the scriptures. No! The Laws were meant to convict of sin and condemn, in order to lead ‘away’ from them to the promise symbolized under the ceremonies. The Laws point way from themselves, as a covenant of works must be superseded by the covenant of grace:

The law is not based on faith; on the contrary, "The man who does these things will live by them. (Galatians 3:12, NIV)

Now when the scriptures say’s ‘faith’ it means nothing less than faith in Christ, which is the covenant of grace. Therefore the scripture says the Laws of Moses are not based on faith in Christ and the covenant of grace, but are based on works, for the man who ‘does’ these things will live by them, not the man who has righteousness apart from works by faith.

Personally I think this single verse should be clear enough on the distinction showing that the Laws of Moses was a renewal of the covenant in every mans conscience that was first made with Adam and is a covenant of works driving fearful consciences to the Promise of grace. Under this law people could still be saved by faith in Christ, just as condemned souls sensing the guilt under their own conscience today can come to Christ, but Law and guilty condemned consciences are not grace they only lead to it:

So the law was put in charge to lead us to Christ that we might be justified by faith. (Galatians 3:24, NIV)

Regarding sinners without Moses and Christ, they have the same law:

since they show that the requirements of the law are written on their hearts, their consciences also bearing witness, and their thoughts now accusing, now even defending them (Romans 2:15, NIV)

Clearly this law of conscience in sinners, who do not know Moses and do not know Christ, can’t be based on faith and is not ‘gracious’. To me, in order to understand a large portion of the New Testament one must understand that the Law of Moses and human conscience is absolutely different from grace.

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.