The judges said it suggested that women were in a market place, and infringed on their right to divorce.
But they rejected the argument that the bride price itself was unconstitutional.
Campaigners said that the dowry turns a woman into the husband’s property.
Should a marriage end in Uganda, the wife had been expected to refund the bride price – often paid in livestock.
But it was argued that as women tend to have less wealth than their husbands, many became trapped in unhappy relationships.
There was a gasp in the court-room when the first justice ruled against the refunding of the bride price.
This is being seen by those behind the case as a major step in chipping away at a tradition that is detrimental to women.
But as most of the judges acknowledged many Ugandans support the idea of a bride price, which they do not see as a commercial transaction.
The women’s rights organisation Mifumi, which brought the case, welcomed the ruling, despite not getting everything it campaigned for.
“This is a momentous occasion… and this ruling will aid the fight against women and girls’ rights abuses,” spokesperson Evelyn Schiller told the BBC outside the court
The BBC’s Patience Atuhaire in the capital, Kampala, says that traditionally the bride price is seen as an honour and a sign that the couple are entering into a respectful marriage.
Mifumi said that bride price encouraged domestic violence and could lead a man to think that he had paid for his wife’s “sexual and reproductive capacity”.
Six of the seven judges said that the direct link between the bride price and domestic violence had not been proved.
However, they did say that using the phrase “bride price” was wrong as it made it look like the woman was purchased.
The only dissenting opinion came from Justice Esther Kisakye, who said that while the constitution supports culture “it [only] validates customs that respect the rights of all Ugandans”.