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Watson's Biblical & Theological Dictionary
The Greek word διαθηκη occurs often in the Septuagint, as the translation of a Hebrew word, which signifies covenant: it occurs also in the Gospels and the Epistles; and it is rendered in our English Bibles sometimes covenant, sometimes testament. The Greek word, according to its etymology, and according to classical use, may denote a testament, a disposition, as well as a covenant; and the Gospel may be called a testament, because it is a signification of the will of our Saviour ratified by his death, and because it conveys blessings to be enjoyed after his death. These reasons for giving the dispensation of the Gospel the name of a testament appeared to our translators so striking, that they have rendered διαθηκη more frequently by the word testament, than by the word covenant. Yet the train of argument, where διαθηκη occurs, generally appears to proceed upon its meaning a covenant; and therefore, although, when we delineate the nature of the Gospel, the beautiful idea of its being a testament, is not to be lost sight of, yet we are to remember that the word testament, which we read in the Gospels and Epistles, is the translation of a word which the sense requires to be rendered covenant. A covenant implies two parties, and mutual stipulations. The new covenant must derive its name from something in the nature of the stipulations between the parties different from that which existed before; so that we cannot understand the propriety of the name,
new, without looking back to what is called the old, or first. On examining the passages in Galatians 3, in 2 Corinthians 3, and in Hebrews 8-10, where the old and the new covenant are contrasted, it will be found that the old covenant means the dispensation given by Moses to the children of Israel; and the new covenant the dispensation of the Gospel published by Jesus Christ; and that the object of the Apostle is to illustrate the superior excellence of the latter dispensation. But, in order to preserve the consistency of the Apostle's writings, it is necessary to remember that there are two different lights in which the former dispensation may be viewed. Christians appear to draw the line between the old and the new covenant, according to the light in which they view that dispensation. It may be considered merely as a method of publishing the moral law to a particular nation; and then with whatever solemnity it was delivered, and with whatever cordiality it was accepted, it is not a covenant that could give life. For, being nothing more than what divines call a covenant of works, a directory of conduct requiring by its nature entire personal obedience, promising life to those who yielded that obedience, but making no provision for transgressors, it left under a curse "every one that continued not in all things that were written in the book of the law to do them." This is the essential imperfection of what is called the covenant of works, the name given in theology to that transaction, in which it is conceived that the supreme Lord of the universe promised to his creature, man, that he would reward that obedience to his law, which, without any such promise, was due to him as the Creator.
No sooner had Adam broken the covenant of works, than a promise of a final deliverance from the evils incurred by the breach of it was given. This promise was the foundation of that transaction which Almighty God, in treating with Abraham, condescends to call "my covenant with thee," and which, upon this authority, has received in theology the name of the Abrahamic covenant. Upon the one part, Abraham, whose faith was counted to him for righteousness, received this charge from God, "Walk before me, and be thou perfect;" upon the other part, the God whom he believed, and whose voice he obeyed, beside promising other blessings to him and his seed, uttered these significant words, "In thy seed shall all the families of the earth be blessed." In this transaction, then, there was the essence of a covenant; for there were mutual stipulations between two parties; and there was superadded, as a seal of the covenant, the rite of circumcision, which, being prescribed by God, was a confirmation of his promise to all who complied with it, and being submitted to by Abraham, was, on his part, an acceptance of the covenant.
The Abrahamic covenant appears, from the nature of the stipulations, to be more than a covenant of works; and, as it was not confined to Abraham, but extended to his seed, it could not be disannulled by any subsequent transactions, which fell short of a fulfilment of the blessing promised. The law of Moses, which was given to the seed of Abraham four hundred and thirty years after, did not come up to the terms of that covenant even with regard to them, for, in its form it was a covenant of works, and to other nations it did not directly convey any blessing. But although the Mosaic dispensation did not fulfil the Abrahamic covenant, it was so far from setting that covenant aside, that it cherished the expectation of its being fulfilled: for it continued the rite of circumcision, which was the seal of the covenant; and in those ceremonies which it enjoined, there was a shadow, a type, an obscure representation, of the promised blessing, Luke 1:72-73 .
Here, then, is another view of the Mosaic dispensation. "It was added, because of transgressions, till the seed should come to whom the promise was made," Galatians 3:19 . By delivering a moral law, which men felt themselves unable to obey; by denouncing judgments which it did not of itself provide any effectual method of escaping; and by holding forth, in various oblations, the promised and expected Saviour; "it was a schoolmaster to bring men unto Christ." The covenant made with Abraham retained its force during the dispensation of the law, and was the end of that dispensation.
The views which have been given furnish the ground upon which we defend that established language which is familiar to our ears, that there are only two covenants essentially different, and opposite to one another, the covenant of works, made with the first man, intimated by the constitution of human nature to every one of his posterity, and having for its terms, "Do this and live;" —and the covenant of grace, which was the substance of the Abrahamic covenant, and which entered into the constitution of the Sinaitic covenant, but which is more clearly revealed, and more extensively published in the Gospel. This last covenant, which the Scriptures call new in respect to the mode of its dispensation under the Gospel, although it is not new in respect of its essence, has received, in the language of theology, the name of the covenant of grace, for the two following obvious reasons: because, after man had broken the covenant of works, it was pure grace or favour in the Almighty to enter into a new covenant with him; and, because by the covenant there is conveyed that grace which enables man to comply with the terms of it. It could not be a covenant unless there were terms,— something required, as well as something promised or given,—duties to be performed, as well as blessings to be received. Accordingly, the tenor of the new covenant, founded upon the promise originally made to Abraham, is expressed by Jeremiah in words which the Apostle to the Hebrews has quoted as a description of it: "I will be to them a God, and they shall be to me a people," Hebrews 8:10 :—words which intimate on one part not only entire reconciliation with God, but the continued exercise of all the perfections of the Godhead in promoting the happiness of his people, and the full communication of all the blessings which flow from his unchangeable love; on the other part, the surrender of the heart and affections of his people, the dedication of all the powers of their nature to his service, and the willing uniform obedience of their lives. But, although there are mutual stipulations, the covenant retains its character of a covenant of grace, and must be regarded as having its source purely in the grace of God. For the very circumstances which rendered the new covenant necessary, take away the possibility of there being any merit upon our part: the faith by which the covenant is accepted is the gift of God; and all the good works by which Christians continue to keep the covenant, originate in that change of character which is the fruit of the operation of his Spirit.
Covenants were anciently confirmed by eating and drinking together; and chiefly by feasting on a sacrifice. In this manner, Abimelech, the Philistine, confirmed the covenant with Isaac, and Jacob with his father Laban, Genesis 26:26-31; Genesis 31:44-46; Genesis 31:54 . Sometimes they divided the parts of the victim, and passed between them, by which act the parties signified their resolution of fulfilling all the terms of the engagement, on pain of being divided or cut asunder as the sacrifice had been, if they should violate the covenant, Genesis 15:9-10; Genesis 15:17-18; Jeremiah 34:18 . Hence the Hebrew word charat, which properly signifies to divide, is applied allusively in Scripture to the making of a covenant. When the law of Moses was established, the people feasted in their peace-offerings on a part of the sacrifice, in token of their reconciliation with God, Deuteronomy 12:6-7 . See .
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Watson, Richard. Entry for 'Covenant'. Richard Watson's Biblical & Theological Dictionary. https://www.studylight.org/dictionaries/eng/wtd/c/covenant.html. 1831-2.