People typically pay for the services of a notary public and/or a lawyer to have their documents processed. With smart contracts, they can create, enforce, and complete a deal or agreement on their own. Smart contracts allow people to execute deals without a third party.

Smart contracts not only establish the obligations and penalties of an agreement like a traditional contract does, but they can also execute the the terms automatically as well. These digital contracts offer numerous potential applications in various industries.

Three Essential Components

First, a smart contract is a computerized agreement between two individuals. Smart contracts exist on the blockchain—a decentralized, globally distributed database—which makes them immutable.

Second, a blockchain executes a smart contract. This means the agreement can be done without relying on third-party mediation. 

Third, its transactions only transpire once the agreement conditions are fulfilled. This eliminates trust issues from emerging.

(Source: https://financesonline.com/what-is-a-smart-contract/ )