The essential element of the New Covenant is a new heart and a new spirit of the Holy Spirit. Both the OT and NT refer to this transformation as a “circumcision of the heart.” The dynamic in the book of Galatians is that the Law is unable to produce its objective but the Spirit is able. The Law, then, is not to be discarded as an expression of the effects of holiness, but it can never be the cause of true holiness. The highest fulfillment of the Law can be produced only by the indwelling of the Holy Spirit, who brings forth fruit in the believer’s life. This is the New Covenant.
The New Covenant is comprised of two doctrines: justification and sanctification. Justification is the work of the Redeemer, Jesus Christ, who provided purification for sins on the Cross. Sanctification is the work of the Holy Spirit, who moves (causes and enables) the believer to follow God’s decrees.
Law and grace are always in conflict in Paul’s writings when the doctrine of justification is being addressed. However, God’s Law is always viable and purposeful when sanctification is discussed.