There was a thread dedicated to your question created just days ago. I'd suggest reading it (before the nasty personal attacks at the end; which lead to it being locked). I don't know how to copy links to threads, but it was titled "Terrible T&C on award stay and awful CS"

As to the "logic", I suspect from the hotels point of view, if you had cancelled earlier, they could have got a paying customer into the room, rather than it going unoccupied. I'm sure there are tons of other reasons (which other FTers will no doubt be quick to point out in grave detail) but that's probably the short version...