This research is essentially focused on the existence of a legal basis for what is called FirstrnDemand (independent) Guarantee and the applicability of relevant laws thereto. Thus, inrnachieving this end, legal and case analysis are principally used.rnOften times, within transactions the risk of non-payment or non-performance is always there.rnTo avoid or, at least, to minimize this risk guarantee is a preferred tool. Nonetheless, thernconventional guarantee concept which is subject to various defenses and conditions beforernpayment is perceived to be ineffective and time-consuming. Since such traditional guarantee isrnan accessory one, it is prone to rigorous court litigation. This leads creditors to lose the realtimernvalue of money. In todayâ€™s Ethiopia, the need to use for the first demand (independent)rntype of guarantee is growing faster both in public and private procurements.rnThis research is a modest attempt at discussing the need to have an adequate legal frameworkrnalong with proper demarcation of the judiciaryâ€™s role. Moreover, the research indicates thernusage of the power of foreclosure sale against collaterals employed during the issuance ofrnFDGs by the banks while there is no legal right to this effect, as the Property Mortgaged orrnPledged with Banks Proclamationâ€™s scope of application is limited to loan reimbursement andrnyet issuing guarantee is not recognized as a loan under the law. Finally, this study underlinesrnthe need to make some legal development in addressing the problem.