Is Yahoo actually a registrar, or did they simply register the domain on his behalf? If the former then yes they would be compelled to let him transfer it elsewhere. If the latter then Yahoo technically owns the domain and can do with it as they please.
Always, always control your own domain registration and do so at a reputable registrar. Don't use your webhost and don't use a company that does anything but domain services.
Companies that do registration on the side or as a bonus to hosting packages tend to do things like automatically re-register your domain even after billing fails without notifying you, then submit the whole $20 to a bill collector without notifying you, keep the domain operating for an extra 6 months so you have no idea that anything went wrong, but kill it after said 6 months with another 6 months left on the registration with no way to make any changes to the domain because they refer any support requests to the bill collector -- because this definitely did not happen to me and it definitely didn't happen at a company called 1&1 Internet Inc. because that would be totally absurd. cough.
Always, always control your own domain registration and do so at a reputable registrar. Don't use your webhost and don't use a company that does anything but domain services.
Companies that do registration on the side or as a bonus to hosting packages tend to do things like automatically re-register your domain even after billing fails without notifying you, then submit the whole $20 to a bill collector without notifying you, keep the domain operating for an extra 6 months so you have no idea that anything went wrong, but kill it after said 6 months with another 6 months left on the registration with no way to make any changes to the domain because they refer any support requests to the bill collector -- because this definitely did not happen to me and it definitely didn't happen at a company called 1&1 Internet Inc. because that would be totally absurd. cough.