The ScriptManager must appear before any controls that need it

The ScriptManager is a control that needs to be added to the page you have created.

Take a look at this Sample AJAX Application.

<body>
    <form runat="server">
        <asp:ScriptManager ID="ScriptManager1" runat="server"></asp:ScriptManager>
        ...
    </form>
</body>

If you are using microsoft ajax on your page you need the script manager control added to your master page or the page that needs it. It Manages ASP.NET Ajax script libraries and script files, partial-page rendering, and client proxy class generation for Web and application services

<asp:ScriptManager ID="ScriptManger1" runat="Server">
</asp:ScriptManager>

The full usage

<asp:ScriptManager
    AllowCustomErrorsRedirect="True|False"
    AsyncPostBackErrorMessage="string"
    AsyncPostBackTimeout="integer"
    AuthenticationService-Path="uri"
    EnablePageMethods="True|False"
    EnablePartialRendering="True|False"
    EnableScriptGlobalization="True|False"
    EnableScriptLocalization="True|False"
    EnableTheming="True|False"
    EnableViewState="True|False"
    ID="string"
    LoadScriptsBeforeUI="True|False"
    OnAsyncPostBackError="AsyncPostBackError event handler"
    OnDataBinding="DataBinding event handler"
    OnDisposed="Disposed event handler"
    OnInit="Init event handler"
    OnLoad="Load event handler"
    OnPreRender="PreRender event handler"
    OnResolveScriptReference="ResolveScriptReference event handler"
    OnUnload="Unload event handler"
    ProfileService-LoadProperties="string"
    ProfileService-Path="uri"
    RoleService-LoadRoles="True|False"
    RoleService-Path="uri"
    runat="server"
    ScriptMode="Auto|Inherit|Debug|Release"
    ScriptPath="string"
    SkinID="string"
    SupportsPartialRendering="True|False"
    Visible="True|False">
        <AuthenticationService
            Path="uri" />
        <ProfileService
            LoadProperties="string"
            Path="uri" />
        <RoleService
            LoadRoles="True|False"
            Path="uri" />
        <Scripts>
            <asp:ScriptReference
                Assembly="string"
                IgnoreScriptPath="True|False"
                Name="string"
                NotifyScriptLoaded="True|False"
                Path="string"
                ResourceUICultures="string"
                ScriptMode="Auto|Debug|Inherit|Release" />
        </Scripts>
        <Services>
            <asp:ServiceReference
                InlineScript="True|False"
                Path="string" />
        </Services>
</asp:ScriptManager>

You can add your Script Manager tags just below the <Form> tag of your page. Here is how you can place your Script Manager tag.

    <asp:ScriptManager ID="ScriptManager1" runat="server">
    </asp:ScriptManager>

If you are using Master Pages, its recommended to use your Script Manager in your Master page so that you do not have to write it again and again on every page that contains AJAX controls.

Just put ScriptManager inside form tag like this:

<form id="form1" runat="server">
    <asp:ScriptManager ID="ScriptManager1" runat="server">
    </asp:ScriptManager>

If it has Master Page then Put this in the Master Page itself.

There many cases where script Manager may give problem like that. you Try This First add Script Manager in appropriate Placeholder or any place Holder which appears before the content in which Ajax Control is used.

We need to add ScriptManager while using any AJAX Control not only update Panel. <asp:ScriptManager ID="ScriptManger1" runat="Server" />
If you are using Latest Ajax Control Toolkit (I am not sure about version 4.0 or 4.5) you need to use that Particular ToolkitScriptManager and not ScriptManager from default Ajax Extensions.
You can use only one ScriptManager or ToolKitScriptManager on page, If you have added it on Master Page you no need to add it again on Web Page.
The problem mentioned here may because of ContentPlaceHolder Please Check how many content place holders you have on your master page. Lets take an example if you have 2 content Placeholders "Head" and "ContentPlaceHolder1" on Master Page and ContentPlaceHolder1 is your Content Page.please check below code I added here my ScriptManager on Second Placeholder just below there is update panel.

<!DOCTYPE html>

<html xmlns="http://www.w3.org/1999/xhtml">
<head runat="server">
    <title></title>
    <asp:ContentPlaceHolder id="head" runat="server">
    </asp:ContentPlaceHolder>
</head>
<body>
    <form id="form1" runat="server">
    <div>
        <asp:ContentPlaceHolder id="MainContent" runat="server">
        <asp:ScriptManager ID="ScriptManger1" runat="Server" />
          <asp:UpdatePanel ID="UpdatePanel1" runat="server">
    <ContentTemplate>
    </ContentTemplate>
</asp:UpdatePanel>
        </asp:ContentPlaceHolder>
    </div>
    </form>
</body>
</html>

Most of us make mistake while designing web form when we choose masterpage by default on web page there are equal number of placeholders as of MasterPage.

<%@ Page Title="" Language="C#" MasterPageFile="~/Master Pages/Home.master" AutoEventWireup="true" CodeFile="frmCompanyLogin.aspx.cs" Inherits="Authentication_frmCompanyLogin" %>

<asp:Content ID="Content1" ContentPlaceHolderID="head" Runat="Server">
</asp:Content>
<asp:Content ID="Content2" ContentPlaceHolderID="MainContent" Runat="Server">
</asp:Content>

We no need to remove any PlaceHolder it is guiding structure but you must have to add the web form Contents in Same PlaceHolder where you added your ScriptManager(on Master Page) or add Script Manager in appropriate Placeholder or any place Holder which appears before the content in which Ajax Control is used.

The ScriptManager must appear before any controls that need it

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