The Term “Smart Contract” was first used by Nick Szabo in 1997, long before Bitcoin was created. He is a computer scientist, law scholar and cryptographer and is one of the first people to use Bitcoin. In simple terms: he wanted to used a distributed ledger to store contracts.
Now, Smart contracts are just like contracts in the real world, the only difference being that they are completely digital. Smart contracts are actually a tiny computer program that is stored inside a blockchain.