On one level, the terms covenant and contract are used interchangeably. However, there are some finer distinctions between the two.
A contract is a rather modern legal construct. It is a legally binding agreement to do or not do something. It often includes penalties for a breach of contract. If the contract is breached and penalties are paid, then the payment is considered to be adequate compensation for the breach of contract. There is not necessarily any moral failing involved in the breach. If a person breaches the contract but willingly pays the penalties, this is not seen as a moral failing, because the contract assumes the possibility of a breach. As an example, if a tenant signs a one-year lease for an apartment with a $1,000 penalty for breaking the lease early, and then the tenant wants to get out of the lease and pays the penalty, then all is well. The tenant broke the lease, and the landlord was compensated according to the contract. The landlord may not be happy about it, and the tenant may not be happy to pay the penalty, but both did what they said they would do.
A covenant is an ancient construct wherein two parties promise to do something or not do something. Because of the fallen nature of humanity, the covenant may include penalties for breaking the covenant, but, unlike a contract, it is considered immoral to break a covenant—it is a betrayal of trust. There is never a sense in which it is morally upright for a person to break a covenant, even if the covenant-breaker is willing to pay the penalties.
The difference between a contract and a covenant can be illustrated in current attitudes about marriage. Some people approach marriage as a contract between two parties. They both willingly enter into the marriage contract, and, later, if one or both of them want to exit the relationship, they simply negotiate the payments and penalties (alimony, splitting property, custody agreement for kids, etc.) and move on without any moral stigma. Some couples go into marriage with a prenuptial agreement that outlines, before the couple is even married, how the payments and property will be split in a divorce.
Biblically speaking, marriage is not a contract but a covenant between two people with God and the rest of the community as witnesses. One should not enter marriage with an eye to what will happen if or, in the case of some couples, when the marriage is dissolved. Marriage is meant to be for life, and there is always a moral component and a moral failing, by one or both parties, when a marriage fails. The breaking of the marriage covenant involves the violent separation of the “one flesh” that was created by the marriage. While the Bible does allow for divorce in certain cases (see Matthew 19:19 and 1 Corinthians 7:15), this is not what God intended. “But at the beginning of creation God ‘made them male and female.’ ‘For this reason a man will leave his father and mother and be united to his wife, and the two will become one flesh.’ So they are no longer two, but one flesh. Therefore what God has joined together, let no one separate” (Mark 10:6–9).
God is a covenant-keeping God, and Christians should be covenant-keeping people. We should honor our word and keep our promises, even when there is not an official contract in place. Every promise that a Christian makes should be considered a covenant. The command is to “simply let your ‘Yes’ be ‘Yes,’ and your ‘No,’ ‘No’” (Matthew 5:37, BSB).