In classic federal theology, the covenant of grace is understood in two different ways. For some, it was understood as one of two covenants, such that God's total redemptive purpose included both “the covenant of redemption,” which was formed among the persons of the godhead in eternity and “the covenant of grace” which was principally formed between God and the elect in time. For others, “the covenant of grace” was viewed as a pact among the persons of the Trinity. They said that the eternal covenant of grace had two aspects because it was made (1) with Christ and (2) with the elect in Him. I take the latter view because the former seems to multiply entities beyond necessity.
The covenant of grace was formed in eternity past, but was executed and obeyed in time during Christ’s earthly life. In eternity past, God made a covenant with Christ in which God promised justification and eternal life to those in Him on the basis of His perfect obedience to the law. During Christ’s earthly life (which was His “probationary period,” corresponding to Adam's "probationary period" the garden), Christ kept the law both by positively obeying its commands and by suffering under its curse. His perfect law keeping merited justification and eternal life for all of the elect. His merits purchased redemption for that moment at which the elect would be vitally united to Him through faith. Thus, the covenant of grace was a conditional covenant of works from Christ's perspective. He had to merit its blessings.
Because Christ successfully satisfied God’s law during His time on earth, those who were chosen "in Him," will necessarily be given all the benefits purchased by His merits. Those who are “in Christ” obtain the right to justification even before they are conceived or regenerated. The right to justification is not the same thing as justification itself. But having the right to justification guarantees and requires that God bring each of Christ’s constituents into physical existence (that they be born) and that He bring them into a state of regeneration and faith so that they are able to experience actual justification and eternal life. The right to justification necessarily issues in actual justification. After regeneration and faith, the elect are immediately granted actual justification and eternal life and based on Christ’s righteousness. Thus, the covenant of grace is unconditional from the perspective of the elect. Regeneration, repentance, and faith are not conditions of entering into the covenant of grace or of remaining in the covenant of grace. Rather, they are unconditional blessings of the covenant of grace. This is true, even though repentance and faith are conditions in the covenant of grace in the sense that they are antecedent to subsequent blessings in the covenant. Ex: Faith is not a condition of the covenant of grace, but it is a condition (logically speaking) of justification in the covenant.
Because all who are united to Christ are blessed with actual justification, which is the right and title to (or, "ownership/possession of") eternal life (objectively), they must also come into the experience and enjoyment of eternal life (subjectively). Only those who are holy can joyfully experience eternal life in Christ. Therefore, God blesses those who are in Christ with increasingly renewed natures, which put off sin and put on good works, such that just as they grow in holiness, they also grow in the joy of knowing Christ. Christ's righteousness purchased not only our ownership of life (justification-objective), but our experience of life (sanctification-subjective) as well! When those “in Christ” die they will enjoy the ultimate blessing of eternal life in heaven, which is the consummate reward of Christ’s perfect righteousness.