Imagine living in a world where very few people read or write. How do you make contracts?
You and your neighbor fought for years over who gets the well that's in the middle of your property lines. Eventually, you agree to share it somehow. 20 years later, that same neighbor says he never agreed to share anything, so you are back at square one.
Today, we settle things in court with written records of any deals we make. But in that other world, there were no such documents between a man and his neighbor, because in most cases neither one of them could read or write, and neither could anyone else in town.
In that time, there needed to be a way to make deals that both parties could look back and say, "We remember!" Thus a covenant was born.
You and your neighbor sit down together after you have made an agreement. Together you will take an animal (perhaps a goat or a sheep), and you will cut it in half, with both of you walking through the middle of the animal and saying, "May I also be cut in half if I break our agreement." In this way, you have "cut a covenant", and 20 years later when your neighbor wants to take the well for his own, you and he both remember the covenant. He does not want to bring judgment down on himself, and you have a ritual that you can use to say, "Do you remember our covenant?" Neither one of you will ever forget.
Today laws are made to respond to issues that surface. It was no different in ancient days. I believe that covenants arose as a resonse to issues such as the one I spoke about.
By the time of Abraham, covenants were common, binding agreements between two parties.
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