Fred advertises a 2005 Subaru Impreza for sale for $10999 on the website known as 'eucalyptus for cars'. Peter reads the advertisement. he is interested and so calls Fred. Fred invites him to come and inspect the car and gives Peter his address.

After inspecting the car, Peter says 'I will give you $5000 for this car.' Fred replies "That's no good. I would want at least $8000. Those tyres and rims are worth $4000."

Peter replies 'No, it isn't worth that much.'

Two weeks later Peter sees the same advertisement on that website but for $8999. Peter phones Fred and says 'I would be prepared to pay $4000.' Fred laughs and says "How about we go back to the price you were prepared to pay before - $5000 - that's a deal.'

Discuss the legal effect of each communication and determine if an agreement was formed. (10 Marks)