Covenentalists call these three covenants "theological" because, though not explicitly presented as such in the Bible, they are thought of as theologically implicit, describing and summarizing a wealth of scriptural data. Historical Reformed systems of thought treat classical covenant theology not merely as a point of doctrine or as a central dogma, but as the structure by which the biblical text organizes itself. Methodist hermeneutics traditionally use a variation of this, known as Wesleyan covenant theology, which is consistent with Arminian soteriology.
As a framework for biblical interpretation, covenant theology stands in contrast to dispensationalism in regard to the relationship between the Old Covenant (with national Israel) and the New Covenant (with the house of Israel (Jeremiah 31:31) in Christ's blood). That such a framework exists appears at least feasible, since from New Testament times the Bible of Israel has been known as the Old Testament (i.e., Covenant; see 2 Cor 3:14 , "they hear the reading of the old covenant"), in contrast to the Christian addition which has become known as the New Testament (or Covenant). Detractors of covenant theology often refer to it as "supersessionism" or as "replacement theology", due to the perception that it teaches that God has abandoned the promises made to the Jews and has replaced the Jews with Christians as his chosen people on the Earth. Covenant theologians deny that God has abandoned his promises to Israel, but see the fulfillment of the promises to Israel in the person and the work of the Messiah, Jesus of Nazareth, who established the church in organic continuity with Israel, not as a separate replacement entity. Many covenant theologians have also seen a distinct future promise of gracious restoration for unregenerate Israel.
God's covenantal relationship with his creation is not made automatically or out of necessity. Rather, God chooses to establish the connection as a covenant, wherein the terms of the relationship are set down by God alone according to his own will.
The covenant of works (Latin: foedus operum, also called the covenant of life) was made in the Garden of Eden between God and Adam who represented all mankind as a federal head (Romans 5:12–21). God offered Adam a perfect and perpetual life if he did not violate God's single commandment, but warned that death would follow if he disobeyed that commandment. Adam broke the covenant, thus standing condemned as representative for all mankind.
The term foedus operum was first used by Dudley Fenner in 1585, though Zacharias Ursinus had mentioned a covenant of creation in 1562. The concept of the covenant of works became commonly recognized in Reformed theology by 1590, though not by all; some members of the Westminster Assembly disagreed with the teaching in the 1640s. John Calvin writes of a probationary period for Adam, a promise of life for obedience, and the federal headship of Adam, but he does not write of a covenant of works. It is not referred to as a covenant in the opening chapters of Genesis.