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.