In Jer. 31 God promised to establish a new covenant with His people: "Behold, the days are coming, declares the LORD, when I will make a new covenant with the house of Israel and the house of Judah, not like the covenant that I made with their fathers on the day when I took them by the hand to bring them out of the land of Egypt, my covenant that they broke, though I was their husband…" (Jer. 31:31-32). When God said He would establish a new covenant, He implied that there was an old covenant--"the covenant that I made with their fathers on the day when I took them by the hand to bring them out of the land of Egypt." This referred to the Mosaic Covenant.
How would the new covenant be different from the old covenant? God declared that the new covenant would be "not like the [old] covenant… that they broke…." The old covenant was a breakable covenant, which the people of Israel indeed broke. The new covenant would be an unbreakable covenant. How can the Mosaic Covenant be breakable? Didn't we affirm that the Mosaic Covenant was an administration of the covenant of grace? And if it is a covenant of grace, it cannot be broken, can it? Grace is God's favor extended to sinners. The sinfulness of sinners, their inability to keep God's law, is presupposed. When God established the covenant of grace, He did so with His omniscient, full knowledge of our sinfulness. He does not get shocked and dismayed because we are more sinful than He thought! That is why the covenant of grace cannot be revoked or broken. A covenant of works, like the covenant of life God made with Adam, is bilateral--that is, it requires man to fulfill certain conditions to receive the blessings of the covenant. As such, a covenant of works is breakable. The covenant of grace, on the other hand, is unilateral in nature--that is, it is not contingent on how we perform but wholly dependent on God's sovereign grace toward us.