For five years now, Bumberry Bank has entered into a one-year line of credit with Dunsworth (which it has renewed every year), secured by all of his livestock and equipment. Each year, the security agreement included a prohibition against Dunsworth’s sale of any collateral without first getting Bumberry Bank's approval. However throughout the five years, Bumberry Bank never objected when Dunsworth sold cattle, and never attempted to enforce its security interest against any of the buyers of Dunsworth's cattle.

Brian Ess recently entered into a security agreement with Bumberry Bank similar to the one Bumberry Bank had with Dunsworth. Upon selling some cattle to Bailey with the prior approval of Bumberry Bank, Bumberry Bank claimed that it retained a security interest in the livestock despite the sale to Bailey. Ess argues that the course of dealing between Bumberry Bank and Dunsworth proves that he had ability to sell livestock, free of Bumberry Bank's security interest. Which statement is correct?

1. Both Dunsworth and Ess can sell livestock free of Bumberry Bank's security interest

2. Ess can rely on the course of dealing between Bumberry Bank and Dunsworth

3. While Dunsworth's past sales established a course of performance that permitted Dunsworth to sell free and clear of Bumberry Bank's interest, that course of performance is irrelevant to Ess's conduct, and so Bailey took title subject to Bumberry Bank's security interest

4. Neither Dunsworth nor Ess can sell livestock free of Bumberry Bank's security interest, under any circumstance.