Tony advertises a 2014 Honda Civic car for sale at $12,999 on a website known as Koala Car Sales. Mike reads the advertisement. He is interested and so calls Tony. Tony invites him to inspect the car, giving him the address. After inspecting the car, Mike says I will give you $7,000 for this car. Tony responds, Thats no good. I would want at least $10,000 as those tyres and rims are worth $4,500. Mike replies, Sorry mate but it isnt worth that much to me. Three weeks later Mike sees the same advertisement on the same website but this time selling the car for $10,500. Mike phones Tony and say I would be prepared to pay $5,500. Tony laughs and says How about we go back to your original price of $7,000. We have a deal.

1. Discuss the legal effect of each communication and determine if an agreement was formed?

2. Assuming there was an agreement reached between Tony and Mike, discuss whether it would be supported by the necessary intention and consideration to be recognised as a contract?