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Smart contracts are self-executing contracts with the terms of the agreement directly written into code. When specific conditions predefined in the code are met, smart contracts automatically execute transactions or enforce actions without the need for intermediaries. This automation leads to increased efficiency and reduced costs, as the process is handled directly by the code rather than requiring manual intervention.

The other options do not accurately describe the function of smart contracts. Negotiations between parties imply a back-and-forth dialogue that smart contracts do not facilitate; they operate on predefined terms without flexibility. Legal reviews of contracts require human judgment and interpretation of complex legal language, which is not within the capability of smart contracts. Lastly, verification through human oversight contradicts the fundamental principle of smart contracts, where operations are designed to be automated and trustless, thereby minimizing or eliminating the need for human involvement.