One further thing occurs to me. IANAL, but I would have thought that, in the event of an accident involving a solo student, a school would be (more) open to a claim of negligence if they had not ensured that the student had a reasonable understanding of the task in hand. This would imply an understanding of the Rules of the Air, for example, before flying solo, and further topics such as Navigation and Meteorology before being allowed out of the circuit. So while it may not be a legal requirement to pass Air Law, it would be pragmatic of the school to require it of students.