In Reformed theology, we call God’s oath to be God to his people and their seed the “covenant of grace.” Beginning with the promise of One who would crush the head of the serpent in Genesis 3, God has covenanted with his people to be their deliverer. The exact term “covenant of grace” is not in Scripture, so why do we call it that in Reformed theology? Francis Turretin answered this question well:
“Not without reason did the Holy Spirit wish to designate the covenant of grace under the name ‘promise,’ because it rests entirely upon the divine promise. In this it wonderfully differs, not only from all human covenants (which consist of mutual obligation and stipulation of the parties), but from the covenant of works (which although it also had its own promise on the part of God to the doers and so was founded on the goodness of God, still it required obedience on the part of man that it might be put into execution).”
“But here God wished the whole of this covenant to depend upon his promise, not only with regard to the reward promised by him, but also with regard to the duty demanded from us. Thus God performs here not only his own part, but also ours; and if the covenant is given for the happiness of only the one party, it is guarded and fulfilled by the fidelity of only one party. Hence not only God’s blessings fall under the promise, but also man’s duty; not only the end, but also the means and conditions leading us to it (as will be shown in the proper place).”
I appreciate this summary of why we call this covenant the covenant of grace: because, ultimately, salvation belongs to the Lord (Jonah 2:9), and it is all of grace (Eph. 2:4-5)!
The above quote was taken from volume 2, page 173 of Turretin’s Institutes.