The term "smart contracts" originated back in 1996 when a computer scientist, Nick Szabo, used the term "smart contracts" in his paper. Additionally, he was also a cryptographer and law scholar. Smart contracts include a collection of promises that are defined in digital form. It also contains protocols written into some lines of code. Promises are kept by two parties within the protocols that are put in blockchain.
Smart contracts in blockchain work just like escrow company which performs their task as a source of trust. I know you understand the role of escrow company very well. Then you know also that this company charge a fee to perform their task which is higher than that of smart contracts. You can know more about it watching the above video.
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Source:
https://www.quora.com/What-are-smart-contracts