Actually, yes, the law does say so. Contract law does not require that both parties to the contract have parity of rights and/or obligations under the contract. Contracts can be extremely one sided and still enforceable (assuming, of course, the promises contained within are not illusory, or that the terms are not void as against public policy, amongst other considerations). All contracts allow parties to do is to arrange their affairs and dealings in advance with some degree of certainty. Entering into a Contract (in most common law jurisdictions) requires a "bargain" between the parties. In simplistic terms, you know (or are deemed to know) what you are getting into when you fork over money to an airline in return for their promise of transportation.

The conditions the airline imposes upon such an agreement are readily available to the purchaser prior to purchase. It's up to you whether you choose to actually read the fine print. Additionally, it's up to you whether you evaluate that fine print and allow it to influence your purchasing decision. The airline generally has no legal obligation to provide you, the consumer, with a contract that is primarily to your benefit. As businesses, airlines generally craft contracts that are to their benefit. As a consumer, the only power you have to modify such behavior (so long as the behavior does not involve other illegalities such as deceptive trade practices, fraud, etc.) is by withholding your funds from that business, or by finding another business more willing to accede to your requirements for a suitable contract of carriage.

[Edited to Add:] The airline cannot actually do whatever it wants as regards the agreement. It must abide by the terms of the agreement itself. Or, if the agreement does not actually create a binding obligation on the airline, it would be void for lack of mutuality due to the airline's illusory promise. (e.g., A contract of carriage allowing the airline to refuse to transport you for any reason, without notice, and without providing you a refund, would void the contract due to the illusory nature of the airline's promise).

Granted, there is a difference between contract law and providing good customer service. CO may have been perfectly entitled to act as it did...but did this make good business sense? Likely not.

(Disclaimer - The snippets of contract law lightly touched upon herein are by no means thorough and should not be relied upon in any fashion as providing a complete or even partially complete portrait of how that area of law operates. If you suffer from insomnia and are looking for a surefire cure, may I suggest obtaining a copy of Calamari & Perillo on Contracts. Happy reading).