Here is the easiest way to explain the difference:
Grace: Here's a gift, because I love you!
Undeserved Kindness: Here's a gift, because I'm so loving! By the way, you don't deserve it, and you never could. I just want to make sure that you know that. Seriously.... There's no way you could ever deserve anything, but since I'm so benevolent, I'm lowering myself to give you this. Your ancient anscestors pissed me off, so I'm still holding you accountable. This gift can be revoked at any time. Oh, yeah, sign here. Don't forget to read the fine print. Enjoy!!
Imagine giving a gift to your child, or spouse, or significant other, and then reminding them how they are nothing but dirt. How would that go? Would that even take place in a healthy relationship?