[James J. Tissot, "Jesus Preaches the Sermon on the Mount" (1886-1896), watercolor.]

Here's some excerpts from an excellent article from Modern Reformation Magazine (http://www.modernreformation.org/default.php?page=main&var1=Home), which deals with the law and grace.
It's title is:

"The Sermon on the Mount"

"... moralism.... continues to flourish. ....Nowhere is this more prominent than in popular treatments of the Sermon on the Mount (Matt. 5-7) where monographs and sermons perpetuate the problem with titles such as "The Keys to Success" and "Blueprint for Building the Christian Life."
...By making the law the terminal point, many unknowingly fashion a Jesus who is more akin to a life coach than a Messiah.
...The Sermon on the Mount must be interpreted in light of its primary recipients, the disciples (Matt. 5:1). Likewise, this discourse must not be torn asunder from the rest of Matthew's Gospel. Jesus not only fulfilled the Law of Moses, but also the promises of Abraham, David, and the prophets. While Matthew certainly includes Mosaic typology throughout his record, it is reductionistic to think of Jesus as simply a new lawgiver or a second Moses.
...Jesus did not come in the flesh to sit on the sidelines of life, cheering us on like some kind of spiritual Phil Jackson. This view leads to pietism (legalism) or antinomianism (licentiousness). Rather, Jesus took the field in our place because we have utterly failed and fouled out. By faith we share in the fulfillment victory he accomplished on another mount called Golgotha, and on account of this, we are freed from the law's tyranny and able to walk by faith in the Spirit bearing good fruit (Matt. 7:20). As the King's disciples we must always look to Yahweh's provision, not our personal performance. Our obedience never affects our relationship with God; it merely reflects the relationship God has graciously bestowed in Christ." -Brian W, Thomas, Vicar of Grace Lutheran Church in San Diego.