This scenario looks incomplete.  It looks like UPDATE 1 would be blocked by UPDATE 2, but for this to be a deadlock there must be some other DML in session 1 that is blocking something in session 2.  How many rows are each of these statements trying to update?  Is one of the sessions leaving an uncommitted transaction open?  Here's some general guidelines for trying to prevent deadlocks:
https://technet.microsoft.com/en-us/library/ms191242(v=sql.105).aspx