He knew he was in an interview for sure, however the terms have changes as soon as the lead developer asked him to code in the current application in order to test his skills.

Lets put this way, you are interviewing for a Car Sales position, you get to the my store and I ask you: Hey, today you gonna spend the day selling cars, it will be our test, and then you sell as many cars as you can for free.

Do you still consider this, part of the interview? Keep in mind that you are bringing profit to my store.