Nothing strange about it. Fulham have just done the same with young Sessegnon, as have Villa with Azaz - and no doubt those are just two examples among many.Does seem strange to offer him a contract to play for another team?
Argyle obviously see enough in Law's potential to commit to him for another 12 months, while at the same time wanting to see him play regular football at a decent level - something we can't offer him this season.
Personally I think he'll end up leaving us next summer because IMO he doesn't have quite enough quality for League One football.